Latest Cato Research on Foreign AidIndividual Liberty, Free Markets, and Peacehttp://www.cato.org/
enamast@cato.org (Andrew Mast)webmaster@cato.org (Cato Webmaster)Tue, 09 Dec 2014 09:09:14 -0500Tue, 09 Dec 2014 09:09:14 -0500Is it 'Game over' for Ukraine?http://www.cato.org/publications/commentary/it-game-over-ukraine
Richard W. Rahn
<p>Ukraine will likely go bankrupt within the next few months. This past Friday, it was reported that the country has less than $10 billion in foreign-currency reserves. My sources (who have been spot on the Russian/Ukrainian situation over the last couple of years) tell me the situation is actually worse than the official reports in that Ukraine is now losing foreign reserves at a rate of $3 billion a month and that rate is accelerating. Even worse, some of the reserves may be “illiquid” — which likely means they have already been spent or even stolen.</p>
<p>Russian President Vladimir Putin very well understands the situation in Ukraine; hence, he may sit back and not try to grab any more territory for the moment and just wait for the Ukrainian economic collapse. The big unanticipated drop in oil prices is hurting Russia and so Mr. Putin has an added incentive not to take on additional military expenses at this time.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Providing more financial aid without reform is a waste of money.”</span></p>
</blockquote>
<p>Last April, the IMF approved a $17 billion dollar support agreement for Ukraine. The announcement was made with all the typical pledges to reform and, most importantly, to reduce corruption. The managing director of the IMF, Christine Legarde, said at the time: “Showing unprecedented resolve, the authorities have developed a bold economic plan to secure macroeconomic and financial stability and address long-standing imbalances and structural weaknesses to lay a firm foundation for high and sustainable growth.” Specific necessary changes were detailed out, including greatly reducing corruption. Virtually none of the pledges have been met, and many knowledgeable observers argue that corruption has not diminished. So much for “unprecedented resolve.”</p>
<p>Where has all the money gone? The ongoing, low-level, war with Russia is often given as an excuse, but the fact is that Ukraine is now spending less than one percent of its gross domestic product on the military. (The United States currently spends 3.5 percent of its GDP on the military, and Russia now spends about 4.1 percent of its GDP on the military.) Much of the Ukrainian budget appears to have been spent on various vote-buying schemes and old-fashioned graft.</p>
<p>The Ukrainian army is now being largely supported by civilian efforts, including individual citizens sending food and clothing to the soldiers on the front lines, and various business people buying weapons, including some heavy weapons. Bizarre as it may seem in the modern world, volunteers are to a large extent funding the defense of the country. (The American army during the time of the Revolutionary War, under Gen. Washington, was also heavily supplied by the efforts of civilians, including leading businessmen, because the states were often well behind in funding their pledges, which were insufficient to begin with.)</p>
<p>This past week, Ukraine’s parliament appointed a new pro-Western government that includes three foreign-born experts in an effort to stave off financial collapse. The new finance minister is the well-regarded former U.S. diplomat and private-equity fund manager, Natalie Jaresko. But all of this may be too late. Last spring, a number of experienced foreign economic advisers, including the late Kakha Bendukidze, the principle architect of the Georgian economic miracle, developed a recovery plan for Ukraine, which has been largely ignored. Ukraine has no shortage of good economists who know what needs to be done — but that is far different from getting the political actors to do what is needed, particularly when they perceive the necessary economic reforms being contrary to their own short-term economic interests. Having been an economic adviser to top officials in the Russian and Ukrainian governments, and others, during the transition period of more than two decades ago, I well understand the difference between providing a road map to economic growth and seeing it implemented.</p>
<p>As the Ukrainian government runs out of money, what will be the response from the United States and other western governments, and the international institutions like the IMF? Providing more financial aid without reform is a waste of money and will not lead to an improved situation. Doing nothing and letting Ukraine fall totally under Mr. Putin’s direct or indirect control will only encourage him to continue nibbling away at his neighbors. Based on past history, what we can expect from the Obama Administration, the Europeans, and the IMF are a number of half-way measures that are unlikely to work.</p>
<p>Ukraine and its neighbor, Poland, were in much the same situation a quarter of a century ago. The Polish people and their leaders had the resolve and wisdom to make the necessary economic political reforms, including getting rid of most of the corruption. Too few Ukrainians demonstrated the resolve, nor did they elect quality leaders. As a result, Poland is a free country with three times the real per capita income of Ukraine. Until the Ukrainians show the resolve and wisdom of the Poles, there is little that outsiders can do to help.</p>
http://www.cato.org/publications/commentary/it-game-over-ukraineMon, 08 Dec 2014 09:01 ESTLatest Cato Research on Foreign AidRichard W. RahnChristopher J. Coyne on why humanitarian action failshttp://www.cato.org/multimedia/cato-audio/christopher-j-coyne-why-humanitarian-action-fails
http://www.cato.org/multimedia/cato-audio/christopher-j-coyne-why-humanitarian-action-failsMon, 08 Sep 2014 19:13 EDTLatest Cato Research on Foreign AidChristopher J. CoyneThe Dead Hand of Socialism: State Ownership in the Arab Worldhttp://www.cato.org/publications/policy-analysis/dead-hand-socialism-state-ownership-arab-world
Dalibor Rohac
<p>Extensive government ownership in the economy is a source of inefficiency and a barrier to economic development. Although precise measures of government ownership across the Middle East and North Africa (MENA) are hard to come by, the governments of Algeria, Egypt, Libya, Syria, and Yemen all operate sizeable segments of their economies—in some cases accounting for more than two-thirds of the GDP.</p>
<p>International experience suggests that private ownership tends to outperform public ownership. Yet MENA countries have made only modest progress toward reducing the share of government ownership in their economies and are seen as unlikely candidates for wholesale privatization in the near future.</p>
<p>MENA countries need to implement privatization in order to sustain their transitions toward more representative political systems and inclusive economic institutions. Three main lessons emerge from the experience of countries that have undergone large privatization programs in the past. First, the form of privatization matters for its economic outcomes and for popular acceptance of the reform. Transparent privatization, using open and competitive bidding, produces significantly better results than privatization by insiders, without public scrutiny. Second, private ownership and governance of the financial sector is crucial to the success of restructuring. Third, privatization needs to be a part of a broader reform package that would liberalize and open MENA economies to competition.</p>
http://www.cato.org/publications/policy-analysis/dead-hand-socialism-state-ownership-arab-worldMon, 25 Aug 2014 13:37 EDTLatest Cato Research on Foreign AidDalibor RohacUS Should Scrap Trade Barriers with Africahttp://www.cato.org/publications/commentary/us-should-scrap-trade-barriers-africa
Marian L. Tupy
<p>Nearly fifty African heads of state are due to kick off the first U.S.-Africa leaders’ summit in Washington DC today. Over the last two decades, Africa has made great gains in global economic integration and poverty reduction. Its importance as a trading partner is likely to grow in the future. American leaders should keep that in mind and help to forge a relationship between the United States and Africa that focuses on mutual gains from trade, not aid.</p>
<p>Sub-Saharan Africa, a region once synonymous with war, poverty and mismanagement, is back in the news as one of new millennium’s success stories. Since 2000, growth has hovered around 5 per cent per year, increasing the average per capita income by 32 per cent.</p>
<p>Africa’s improving economic performance is partly attributable to the high price of commodities and partly due to the continent’s economic liberalisation. At the end of the Cold War, for example, Africa’s rating was 4.71 out of ten on the Fraser Institute’s Economic Freedom of the World index. By 2011, the data from the Canadian think-tank shows, it grew to 6.12.</p>
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<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">It is clear that economic freedom, not aid, is a key contributor to growth and prosperity.”</span></p>
</blockquote>
<p>As a consequence of greater economic freedom and higher growth, the proportion of people living on less than $1.25 a day dropped from 56 per cent to 48 per cent between 1990 and 2010. While not as impressive as in other regions, poverty reduction in sub-Saharan Africa is quite an achievement, considering that that population increased from 507m to 865m over the same time period.</p>
<p>Child mortality has declined from 177 per 1,000 births to 98, a decrease of 45 per cent.</p>
<p>The percentage of population with access to improved drinking water sources rose from 48 per cent to 63 per cent, while the percentage of population with access to sanitation facilities rose from 26 to 31 per cent.</p>
<p>Undernourishment has fallen from 33 per cent to 25 per cent. Average per capita calorie supply rose from 2,150 to 2,430. The number of countries with calorie supply below 2,000 calories, a commonly accepted minimum, fell from 13 African states to three. Calorie intake in Ghana, Mauritius and South Africa is higher than that in European Union members Bulgaria, Latvia and Slovakia.</p>
<p>Along with those improvements came some salutary social developments. The position of women, for example, is improving. According to the World Economic Forum’s Gender Gap Report, which examines the parity of men and women in economic participation and opportunity, educational attainment, health and survival, and political empowerment, the African gender gap has narrowed somewhat between 2006 and 2012. Africa’s gains are particularly visible in education, with record number of girls enrolled at all levels.</p>
<p>Last, but not least, the continent has grown more democratic and peaceful. According to the Freedom House, an American non-governmental organization, in 1990 there were only four politically free countries in Africa. By 2014, there were ten free African countries. According to the researchers at Uppsala University, the number of conflicts remained the same between 1990 and 2013. Most of Africa’s conflicts today, however, are minor conflicts (between 25 and 999 deaths per year), not wars (over 1,000 deaths per year), which have declined from eight to three.</p>
<p>The Washington summit comes eight years after the China-Africa leaders’ summit in Beijing that focused on the expansion of trade and investment between the two markets. The economic relationship between China and Africa has blossomed since then. Between 2006 and 2012, the volume of trade between the two increased from $55bn to $200bn – twice as much as the volume of trade between Africa and the United States. The percentage of Chinese investment going to Africa is four times higher than that of the United States.</p>
<p>While it is true that much of the Chinese investment in Africa has been state-driven, research indicates that Africa has become an attractive destination for tens of thousands of Chinese private sector companies eager to do business in the risky African environment.</p>
<p>For a long time, many Americans have tended to see Africa through the prism of foreign aid. Today, it is clear that economic freedom, not aid, is a key contributor to growth and prosperity. As Bono, the well-known campaigner against global poverty said during his 2012 speech at Georgetown University: “Aid is just a stop-gap. Commerce [and] entrepreneurial capitalism takes more people out of poverty than aid.”</p>
<p>If President Obama wants to help Africa, he should promise to work with Congress to eliminate the remaining tariff and non-tariff barriers to trade with the African continent. If he does so, the U.S.-Africa leaders’ summit will turn out to be both meaningful and lastingly beneficial.</p>
http://www.cato.org/publications/commentary/us-should-scrap-trade-barriers-africaMon, 04 Aug 2014 08:05 EDTLatest Cato Research on Foreign AidMarian L. TupyCancel Aid to Egypthttp://www.cato.org/publications/commentary/cancel-aid-egypt
Doug Bandow
<p>Much about the Obama administration’s foreign policy has been an embarrassment. Some of its failures, such as Iraq, must be shared with its predecessor. In Egypt President Barack Obama and especially Secretary of State John Kerry incompetently followed in the footsteps of several administrations.</p>
<p>Three years ago Hosni Mubarak’s dictatorship ingloriously collapsed. Although student-led protests in Cairo triggered the regime’s demise, it was Mubarak’s plan to move from military rule to family rule that led the generals to abandon him. The Obama administration was constantly following events, first embracing Mubarak, then calling for a negotiated transition, and finally endorsing his overthrow. The Egyptian people ignored Washington at every turn.</p>
<p>The Muslim Brotherhood’s electoral success upset the military’s plans to retain power, but the “deep state” persisted. Mohamed Morsi was elected president, but he had little control—not over the military, which was an empire unto itself, or the police, which refused even to defend the Brotherhood’s headquarters from mob attack, or the courts, whose judges were Mubarak holdovers, or the bureaucracy, staffed during three decades of Mubarak’s rule.</p>
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<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Leave Egyptians to settle their fate.”</span></p>
</blockquote>
<p>Nearly a year ago General Abdel Fatah al-Sisi squashed any possibility of the government slipping outside the military’s control by staging a coup. He coordinated with anti-Morsi demonstrators to take over in the name of democracy, but quickly set about arresting anyone who dared to criticize the coup or its excesses. Since then thousands have been killed, hundreds sentenced to death, and tens of thousands detained. Human rights leaders who led demonstrations against Mubarak are among those receiving lengthy prison terms for organizing protests against Sisi.</p>
<p>Through it all the Obama administration took the least principled position possible. Although U.S. law required a cut-off of financial aid, the president simply refused to characterize the coup as a coup, as if not saying the word made it something else. Officials worried about lost leverage, even though Egyptian officials have always ignored Washington’s political advice. They had little reason to worry; the U.S. had never before stopped subsidizing Cairo’s authoritarian and corrupt rulers. When Saudi Arabia and other Gulf states stepped forward waving large wads of cash, Sisi and his fellow generals lost any reason to heed American advice.</p>
<p>Washington eventually held back the military portion of the $1.55 billion in planned U.S. assistance, apparently to demonstrate a little, but not too much, disapproval. Particularly grotesque regime abuses—mass death sentences imposed in trials offering little evidence against any of the accused, for instance—earned complaints from the Obama administration, but then Secretary Kerry would suggest that democracy still was moving forward. In April the administration said it would allow distribution of half of the $1.3 billion in military aid, and would deliver ten Apache helicopters to Egypt’s military. When I visited Egypt a couple months ago I found that virtually everyone believed America was on the wrong side, a notable if not particularly worthy achievement by the administration.</p>
<p>Now Congress has an opportunity to set things right. Last year Cairo was slated to collect $1.3 billion in military and $250 million in economic assistance. The first always was simply a bribe to Egypt’s real rulers. Since Gamal Abdel al-Nasser seized power in 1952 until Mubarak’s ouster, military leaders directly ran the state. Although conceived of as an incentive to convince Cairo to keep the peace with Israel, the Egyptian military, which has not fought a war in more than four decades, has the most to lose from any hostilities. Egypt would be defeated, and defeated badly, which would cost the generals their expensive toys and probably their power. These days U.S. assistance is as much as subsidy for American defense contractors as it is for Egyptian leaders.</p>
<p>The economic payments lack the political benefit of directly paying off the regime. Moreover, a half-century of development aid has yielded few examples where such transfers actually promote economic growth. More often, government-to-government payments underwrite dirigiste policies and discourage reform by masking the pain of failure. Egypt needs economic reform, not foreign subsidies.</p>
<p>House Republicans, apparently enthused with President Sisi’s promise to smite Islamists—along with everyone else who has the temerity to criticize him ever so slightly—proposed a nominal $50 million cut in economic assistance. (Congressmen Louie Gohmert and Michele Bachmann actually wanted to increase aid in the name of fighting terrorism, even though the regime has targeted all opponents.) That’s barely enough for the new dictator to notice, especially since the military would continue collecting its usual payments to purchase high-tech weapons which are more for show than use. Indeed, military service is good business, since the armed forces control up to 40 percent of the economy. Officers live very well, especially compared to the many Egyptians who cannot find work.</p>
<p>In contrast, the Senate Appropriations Committee proposed to reduce military aid to $1 billion and economic assistance to $150 million. That’s a $400 million reduction. U.S. aid still violates the law, which calls for a cut-off of subsidies after a coup. But at least the amount is noticeable.</p>
<p>However, even the Senate doesn’t go far enough. Congress should end all aid. The administration should shut up about democracy. The Pentagon should be left to cooperate with the Egyptian military on essential tasks, including access to the Suez Canal. The U.S. would still have plenty of leverage—after all, Egypt’s generals will want to continue purchasing newer and better toys, as well as acquiring spare parts for existing weapons.</p>
<p>There is no good answer to Egypt. No one knows how a Morsi presidency would have turned out, but skepticism of the Brotherhood in power is understandable, given the abuses of Islamists elsewhere. We do know how a Sisi presidency is likely to turn out: a rerun of Mubarak’s authoritarian and corrupt reign. That’s not attractive either. Repressive rule isn’t even likely to deliver stability, since the Egyptian people will eventually tire of yet another government which engages in jackbooted arrests, brutal torture, and arbitrary punishment, while failing to deliver economic growth.</p>
<p>The best Washington can do is stay out. Subsidize no one, endorse no one. Stop talking nonsense about democracy. Don’t publicly offer the government advice sure to be rejected. Work privately to advance important interests. Leave Egyptians to settle their fate. Things still might fall apart in Cairo. But for the first time in four decades, America really wouldn’t be at fault.</p>
http://www.cato.org/publications/commentary/cancel-aid-egyptMon, 23 Jun 2014 09:45 EDTLatest Cato Research on Foreign AidDoug BandowHow the European Union Corrupted Eastern Europehttp://www.cato.org/publications/commentary/how-european-union-corrupted-eastern-europe
Dalibor Rohac
<p>Thanks to the funding from the European Union (EU), the countries of Eastern Europe are an increasingly attractive destination for cyclists. In the Czech Republic, hundreds of millions of Euros, predominantly from EU’s structural funds, have been used to create a network of some 25 thousand miles of cycling trails. In Slovakia’s Northern region of Orava, a brand new network of 155 miles of cycling trails set in a picturesque countryside connect the local villages with those in neighboring Poland.</p>
<p>While a boon for cyclists, the inflow of EU money into Eastern Europe is playing a more questionable role in narrowing the gap that new member states in Eastern Europe and the more affluent parts of the EU. Critics of development aid, such as William Easterly of New York University, have long argued that foreign aid directed to badly governed countries in the developing world can worsen corruption and cronyism, and foster authoritarian rule. Although the magnitude of the problem is different, EU funds are exercising a similarly nefarious effect on governance and politics in Eastern Europe.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">The inflow of EU money into Eastern Europe is playing a questionable role in narrowing the gap that new member states in Eastern Europe and the more affluent parts of the EU.”</span></p>
</blockquote>
<p>Between 2014 and 2020, the EU is planning to spend over €350 billion to help narrow the disparities between member states. It does so through several ‘funds’: the European Regional Development Fund, which is the largest of them and which supports the building of infrastructure and job-creation; the European Social Fund, which purports to help the unemployed and the disadvantaged, mostly by providing training programs; and the Cohesion Fund, which was set up in 1994 to provide funding to the poorest member states.</p>
<p>The inflow of EU money into new member states has been estimated at around 4 percent of their GDP. It is not a free lunch, however. European countries are co-financing the projects and provide the bulk of the administrative support to the program. Slovakia’s Institute of Economic and Social Analyses (INESS) estimated in 2011 that each euro coming from EU’s structural funds is matched by up to 90 cents coming from the national budget.</p>
<p>The economic effects of such aid are not obvious. Even if one believes that the inflow of funds helps stimulate aggregate demand, “it is unclear whether the EU funds are crowding out or augmenting domestic spending,” as an IMF study put it. Crowding out is a serious concern in areas of transport and logistics, where private companies that have been doing profitable business without any government support suddenly face competition from new, EU-funded firms.</p>
<p>Many of the EU-funded projects seem to be of marginal value and are overpriced. With €16 million spent on each mile, the short, just 12-mile Lyulin highway connecting the Bulgarian capital Sofia with the nearby city of Pernik counts as one of the most expensive roads on the continent. The construction of the road — which required digging numerous tunnels because of the inauspicious terrain — was delayed and marked by corruption allegations. At some point, the European Commission temporarily froze the funds because it suspected embezzlement.</p>
<p>Or, as CEE Bankwatch, a public watchdog, reported, in the city of Kolín in the Czech Republic the EU provided support to the reconstruction of a railway bridge in order to facilitate water navigation on the river Elbe. According to the watchdog, “too little water transport is expected to justify the project, construction costs are prohibitively high, and the sole company participating in the tender procedure was awarded the contract.”</p>
<p>Last year, Slovakia’s Ministry of Social Affairs spent €100 thousand of an EU grant to combat unemployment for the purchases of pens and disposable raincoats. While relatively trivial in size, it seems representative of the waste that has been unearthed by journalists.</p>
<p>The inflow of EU funds into countries with weak institutions does not mean just wasteful spending but also breeds corruption. The impact may be hard to quantify but is very visible. Before joining the EU, Eastern European countries had made significant progress in reducing cronyism and corruption — mainly because of the numerous reforms they had to adopt in order to qualify for EU membership in the first place. After the accession, not only did the progress come to a halt but some measures of corruption actually deteriorated.</p>
<p>Slovakia, for example, ranked 57th on the 2004 edition of Transparency International’s Corruption Perception Index. By 2013, it moved down to 61st place. The Czech Republic, in turn, fell from 51st to 57th place. The situation is even worse in Romania and Bulgaria, where checks on corruption and outright theft are weaker. In 2008, the European Commission had to suspend the disbursement of any aid because of the extent of corruption and organized crime that surrounded the inflow of EU funds.</p>
<p>Identifying and proving specific instances of corruption and embezzlement of EU funds is often difficult, yet the anecdotal evidence is telling. According to a report by a group of Eastern European think tanks, in the Czech Republic, companies with bearer documentary securities — in which ownership is anonymous — tend to be 23-70 percent more profitable than other joint-stock companies. Between 2008-2013, such companies were awarded public procurement contracts worth at least € 5.6 billion, including EU funds. Also, around € 7.3 billion were awarded to companies in jurisdictions with high levels of privacy protection — so-called ‘tax havens’ — some of which had traceable connections to local politicians.</p>
<p>While Aleš Řebíček was the Czech Minister of Transport from 2006-2009, the construction company Viamont, which he had founded, received over € 500 million from the EU structural funds to improve railway infrastructure around the country. Viamont’s shares are anonymous and the Minister did nothing to refute the allegations that he had a stake in the company at the time when the tender was awarded. Similar cases — involving politically connected companies, botched procurement tenders, or sometimes outright fraud — can be found throughout the region.</p>
<p>Eastern European politicians say that they are determined to fight corruption surrounding the disbursement of EU funds. Such statements often strain credulity, as the region has made little progress in improving the mechanisms of control that would be independent of political control. With an inflow of money that can be used for patronage, governing politicians in member states are the biggest beneficiaries of the status quo. That is consistent with the observed degree of politicization of the EU funds. Instead of permanent secretaries, the disbursement funds are typically controlled by political appointees who are replaced after every election.</p>
<p>Cynics say that the status quo also benefits those who advocate tighter forms of European integration. Richard Sulík, former Speaker of Parliament in Slovakia and a vocal euroskeptic, does not mince words. According to him, “[political elites are] being corrupted by the EU funds in order to shut them up and make sure they pass any stupid piece of legislation that comes here from Brussels.”</p>
<p>Whether the funds are a plot to buy loyalty to the European project in Eastern Europe or just a well-intentioned but mismanaged program, they do not seem to be working. The funds neither seem to be creating economic prosperity nor are they effective at fostering popular support for the European idea. Public confidence in the EU is at historical lows in many Eastern countries and, throughout the continent, anti-EU populists are expected to make significant gains in the forthcoming European election. Maybe it is time for a rethink.</p>
http://www.cato.org/publications/commentary/how-european-union-corrupted-eastern-europeMon, 26 May 2014 09:32 EDTLatest Cato Research on Foreign AidDalibor RohacEgypt Needs Free Trade, Not More Aidhttp://www.cato.org/publications/commentary/egypt-needs-free-trade-not-more-aid
Doug Bandow
<p>Egypt is racing toward dictatorship. Gen. Abdel Fatah al-Sisi even arrested opponents of the proposed constitution in the January referendum. However, Washington always has been more interested in maintaining influence than encouraging democracy or promoting development in Egypt. Toward that end the U.S. provided more than $75 billion in “aid” over the years. In fact, the cash bought little leverage. Hosni Mubarak spent decades oppressing Egyptian citizens and persecuting Coptic Christians despite Washington’s advice to the contrary. Israel’s military superiority, not America’s money, bought peace. Cash for fancy weapons may have won privileged access to Egyptian airspace and the Suez Canal, but today the Egyptian military needs the U.S.—for maintenance on and spare parts for those same weapons—more than the U.S. needs the Egyptian military.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington should set aside political differences and propose that the two governments free up investment and trade.”</span></p>
</blockquote>
<p>Unfortunately, as elsewhere in the Third World, foreign “assistance” actually hindered economic development, effectively subsidizing Cairo’s inefficient dirigiste policies. Most undeveloped rural states attempted state-led development strategies to modernize, with disastrous results. Yet access to foreign cash reduced pressure to make politically painful economic reforms. So it was in Egypt. As long as enough money was available to pay off important interest groups, most notably the military, even a dictator like Mubarak saw no reason to risk political unrest.</p>
<p>A decade ago the government finally recognized the need to open the economy. Rebecca Nelson and Jeremy Sharp of the Congressional Research Service reported on “wide-ranging structural reforms, including tariff reductions, privatization of state-owned enterprises, and reductions in regulation of the private sector, among other policy measures, that aimed to improve the business environment and make Egypt’s economy more competitive.” Meredith Broadbent of the Center for Strategic and International Studies cited corporate tax reductions and insurance regulation modernization. The result was international recognition for Cairo’s efforts, increased foreign investment, and increased economic growth.</p>
<p>However, Egypt then began to fall behind other reformers. According to the Economic Freedom of the World index, Egypt <a href="http://www.freetheworld.com/countrydata.php?country=C39" target="_blank">ranked</a> 53 of 123 in 2000, fell to 94 of 127 in 2003, rose to 78 of 141 in 2007, and then fell back to 99 of 144 in 2010. Important problems remained. For instance, Broadbent pointed to the survival of “significant elements of a heavy-handed statist bureaucracy.” The banking system was opaque, monopolistic and inaccessible. A joint report by the Carnegie Endowment and Legatum Institute pointed to the need to give poor Egyptians clear title to their property, reform the bankruptcy law, and reduce costs of opening, operating and closing businesses.</p>
<p>Corruption was pervasive: Transparency International ranked Egypt at 114 out of 171 countries in 2013. Writing for the Carnegie Middle East Center last June, Ibrahim Saif and Ahmed Ghoneim cited as problem areas “allocations of land, freezing of anti-trust laws, and dubious privatization deals.” They set forth a reform program based on more reliable policies and regulations, minimal intervention in the credit markets, greater transparency in public finance and military economic activities, and reform of investment policy, along with political and judicial improvements.</p>
<p>The economy remained dominated by cronyism and privilege. The military controls anywhere between 15 percent and 40 percent of the economy. Other influential individuals and interests also benefit from state favors. Saif and Ghoneim observed that larger private firms “have disproportionate access to decision makers and may be skewing policy in their direction.” In fact, members of the business elite are suspected of having helped orchestrate artificial shortages to intensify public dissatisfaction with President Mohammed Morsi in order to help justify a coup.</p>
<p>The most serious economic hindrance was extensive and expensive consumer subsidies, particularly for food and fuel. Most of the benefits did not go to those in most need. Alas, explained my Cato Institute colleague Dalibor Rohac: “Not only are subsidies highly ineffective in helping the poor, they are also an increasingly unsustainable drain on the country’s public finances and its foreign reserves.” The cost accounts for roughly a third of the government’s budget and 14 percent of GDP.</p>
<p>Thus, even after the Mubarak reforms unemployment and inflation remained high while Cairo ran large deficits. The benefits of reform failed to reach many people, especially the extreme poor. The situation worsened after the 2011 revolution.</p>
<p>The Morsi government cut gasoline subsidies and raised taxes, only to reverse course under public fire. Cairo also hiked government employment and salaries. The public deficit increased to 11 percent of GDP. Worse was the business environment. Observed Nelson and Sharp: “Continued insecurity stemming from deterioration in law and order has hampered investment.” Other analysts pointed to the lack of certainty of even the direction of policy.</p>
<p>The coup was another large step backwards. The government is focused on suppressing the Brotherhood and any other opposition, as well as reconstituting the “deep state” and old political and economic relationships. Indeed, Gen. al-Sisi appears to be determined on a return to “normal.” Reported the <em>Washington Post</em>: “now some businessmen and officials implicated in post-uprising corruption probes are again in positions of power and influence, including in the cabinet appointed last summer by the military.”</p>
<p>Nor is Gen. al-Sisi likely to court unpopularity by adopting tough reforms. The prime minister said the government plans to “rationalize” the subsidy, but economic reform appears to be a low priority. Finance Minister Ahmed Galal said he hopes to find more outside money to spend on “public investment” and “to bring about greater equality.” In September the regime launched a “$4.2 billion program for “economic development and social justice,” but big spending initiatives elsewhere have not ended well. The government also intends to introduce a public sector minimum wage this year, which will hike state costs and, businesses worry, might eventually be extended to the private sector.</p>
<p>Military rule could offer a form of stability. However, Gen. al-Sisi’s brutality, including the slaughter of Brotherhood protesters in Cairo in August, has encouraged increasingly violent opposition. Policemen are regularly being killed, and both auto and suicide bombings are on the rise. During the 1990s when the Brotherhood was similarly banned some members conducted a campaign of low-level terrorism.</p>
<p>Even sporadic violence, especially if targeting foreigners, could frighten off investors and tourists. Although a number of American firms say they are staying, greater uncertainty in Egypt is one reason Apache Corp. of Houston, the largest U.S. investor in Egypt, sold off a third of its oil stake to China’s Sinopec. Chevron has divested its gas station network.</p>
<p>In this environment American financial assistance would be even more harmful than before.</p>
<p>The massive aid coming from Saudi Arabia and other Gulf states—given purely for the political purpose of combating the Muslim Brotherhood—reduces any financial pressure on the regime to streamline economic policy. Unfortunately, reported the <em>Financial Times</em>: “Another concern, voiced by business and economists, is that the recent easing of Egypt’s economic predicament thanks to largesse from oil-rich Gulf countries, may result in an indefinite deferral of painful but much-needed structural reforms.” More checks from Washington would make the government even less likely to enact those reforms.</p>
<p>While more government-to-government aid to Gen. al-Sisi’s burgeoning pharaonic state would be counterproductive, freer trade would be a positive good. Encouraging greater commerce among nations would naturally increase the demand for Egyptian products and services. Instead of offering artificial subsidies, lower trade barriers would improve the natural reward for an entrepreneurial population.</p>
<p>Two years ago Meredith Broadbent proposed negotiating a free-trade agreement—previous talks left off in 2005—and updating the bilateral investment treaty, probably the easier and quicker task. The Carnegie-Legatum study suggested as a second best creating “qualifying Industrial Zones—especially in the underdeveloped areas of Upper Egypt.” The point is not to boost whoever happens to be ruling the country at the time. Rather, an FTA would aid entrepreneurs and their workers, who would be the ones taking advantage of increased access to the American market. Nine years ago the Institute for International Economics projected that an FTA would increase Egypt’s GDP by three percent annually.</p>
<p>Broadbent pointed out that a new accord also would benefit U.S. firms, which have been left at a disadvantage by the EU-Egyptian FTA. Today America’s top exports to Egypt are agriculture, electronics and machinery, metals, and chemicals. FTAs, she argued, “can serve as systemic tools to help pry open closed government regulatory processes.”</p>
<p>Egypt’s problems are many, serious, and deep. Absent an inclusive political process, the country likely faces an unstable and violent future. However, even wise political leadership, so far lacking in Gen. al-Sisi’s course, is not enough.</p>
<p>Economic reform also is necessary. That is unlikely to come from lectures and money from foreign governments. But the prospect of increased participation in international commerce would offer a far more powerful and direct incentive for action. Washington should set aside political differences and propose that the two governments free up investment and trade.</p>
http://www.cato.org/publications/commentary/egypt-needs-free-trade-not-more-aidMon, 27 Jan 2014 09:14 ESTLatest Cato Research on Foreign AidDoug BandowPolitical Dysfunction in the Philippines Is Hurting Haiyan's Victimshttp://www.cato.org/publications/commentary/political-dysfunction-philippines-hurting-haiyans-victims
Jennifer Keister
<p>Typhoon Haiyan’s destruction in the Philippines has led many to <a href="http://www.washingtonpost.com/blogs/worldviews/wp/2013/11/11/why-the-philippines-wasnt-ready-for-typhoon-haiyan/?wpmk=MK0000200" target="_blank">ask why</a> a country that experiences some 20 such storms annually wasn’t better prepared and <a href="http://www.washingtonpost.com/world/asia_pacific/at-filipino-air-base-desperately-awaiting-a-chance-to-bring-supplies-to-hard-hit-areas/2013/11/12/059edb34-4b9e-11e3-be6b-d3d28122e6d4_story.html" target="_blank">express frustration</a> with the slowness of the response and resultant breakdown of law and order.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Patronage and strongman politics can shape the distribution of disaster aid.”</span></p>
</blockquote>
<p>I’ve spent the better part of three years doing fieldwork in the Philippines — research that did not focus on disaster response, but does highlight a political story that can help explain the trouble responding to Haiyan. While the Philippines is certainly captive to its geography, it is also captive to some of its own political dysfunction. Like many developing economies, the Philippines struggles with a variety of factors that limit its ability to provide for its citizens: poverty, <a href="http://www.transparency.org/country#PHL" target="_blank">corruption</a>, electoral irregularities, and state weakness. Behind many of these phenomena is an informal system of patronage, <a href="http://www.uio.no/studier/emner/sv/iss/SGO2400/h05/undervisningsmateriale/Sidel.pdf" target="_blank">strongman politics</a> (as discussed by <a href="http://www.sup.org/book.cgi?id=422" target="_blank">John Sidel</a>), and family ties (as measured in <a href="https://0d7619fa-a-62cb3a1a-s-sites.googlegroups.com/site/pabloquerubin/research/Dynasties_Querubin_1.pdf?attachauth=ANoY7coPJXaM6BjJbr5VgXBVZ7493Ghtz3cRWnEU74ukzlhZT5iUW8Mho0Q-pzJECfKua3ecM0tlB346Pwzr3MBSpu8icYSox9E02TGPa7RHQHqcvtMCNtjnLE5uf35emQIxlzniB-pteUvU5ExG6VtwPRhlvZh2p31_Vlk-Dyou6DQcqoxrM1XMqynHPw1JsD_ZUCKD6_ucNWd4aVseX72b5mphynLEgueO3kCZCveZDE912ms6oXI%3D&attredirects=0" target="_blank">Pablo Querubin’s</a> work on Philippine family dynasties) that underlie the country’s formal democracy and shape everyday politics. Haiyan highlights the degree to which these pathologies generate under-preparedness for disasters and confound relief efforts.</p>
<p>First, the system is prone to under-provision of public goods and services broadly, but may be particularly ill-suited to disaster preparedness. Disaster preparedness projects are susceptible to the same misappropriation as other public works. <a href="https://www.gfdrr.org/sites/gfdrr.org/files/New%20Folder/Keefer_Disastrous_Consequences.pdf" target="_blank">Philip Keefer</a> and Eric <a href="http://www.lse.ac.uk/geographyAndEnvironment/whosWho/profiles/neumayer/pdf/politics_disaster_risk_reduction.pdf" target="_blank">Neumayer and Thomas Plümper </a>note government incentives for disaster preparedness can be problematic in many countries, but are particularly so in countries struggling with poverty and corruption. <a href="http://elibrary.worldbank.org/doi/abs/10.1093/wbro/lki002" target="_blank">Philip Keefer and Stuti Khemani</a> point to problems like electoral irregularities (<a href="http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2299356" target="_blank">measured in the Philippine context by Cesi Cruz</a>) that limit citizens’ access to information needed to hold officials accountable. Disaster policy is particularly susceptible to this.</p>
<p>Moreover, irregularities in public services and elections are well known to Philippine citizens — eroding public trust to such levels that residents may not obey exhortations to evacuate, or may not believe the government will protect their property from looters or squatters if they did (as noted in <a href="http://www.washingtonpost.com/blogs/worldviews/wp/2013/11/11/why-the-philippines-wasnt-ready-for-typhoon-haiyan/?wpmk=MK0000200" target="_blank">several</a> <a href="http://www.washingtonpost.com/world/asia_pacific/philippines-prepared-for-typhoon-haiyan-but-evacuation-sites-couldnt-withstand-storm-surges/2013/11/11/8515f684-4ac9-11e3-bf60-c1ca136ae14a_story.html" target="_blank">reports</a> from Haiyan-affected areas). <a href="http://link.springer.com/article/10.1007/BF02471954" target="_blank">Numerous</a> <a href="http://muse.jhu.edu/login?auth=0&type=summary&url=/journals/journal_of_health_care_for_the_poor_and_underserved/v018/18.2cordasco.pdf" target="_blank">studies</a> on disaster response note the importance of trust in government for citizen participation in disaster preparedness and evacuation.</p>
<p>Second, these same pathologies can generate frustrating responses once disasters occur — both because of underinvestment in regular services and in response to domestic and international aid efforts. The transportation and communication <a href="http://www.huffingtonpost.com/2013/11/12/philippines-typhoon-response_n_4259501.html" target="_blank">infrastructure</a> needed to coordinate and provide relief was inadequate both due to Haiyan’s destruction, but also to “skimming” and other forms of <a href="http://www.globalpost.com/dispatch/philippines/090304/construction-and-alleged-corruption-the-philippines" target="_blank">misappropriation</a> that <a href="http://www.abs-cbnnews.com/views-and-analysis/05/14/08/building-better-roads-through-fighting-corruption-bert-hofman" target="_blank">reduce construction quality</a>. Indeed, <a href="http://www.nber.org/papers/w11753.pdf?new_window=1" target="_blank">Benjamin Olken</a> measures corruption by the decrease in the quality of road construction.</p>
<p>Similarly, patronage and strongman politics can shape the distribution of disaster aid. Disaster response in the Philippines is often plagued by allegations that local authorities hoard aid supplies and distribute it only to political supporters or family members. As recently as last month, politicians in one of the islands hit by Haiyan were accused of <a href="http://newsinfo.inquirer.net/512307/bohol-mayor-drives-out-red-cross-team" target="_blank">refusing access to relief agencies</a> responding to an earthquake — preferring to distribute the aid themselves, thus <a href="http://newsinfo.inquirer.net/512179/relief-goods-distribution-in-bohol-delayed-by-meddling-campaigning-politicians" target="_blank">garnering credit with their constituencies</a>. Aid distribution also has been accused of falling prey to <a href="http://www.philstar.com/headlines/473663/un-agency-probe-sale-donated-rice-maguindanao" target="_blank">profiteering</a> <a href="http://www.wfp.org/content/guidelines-finalized-aid-distribution">middlemen</a>. To be sure, conspiracy theories are an understandable refuge for frustrated populations whose predicament may be the result of many factors, but the persistence of such accusations in the Philippine context suggests they may contain an element of truth.</p>
<p>Many aid agencies are both logistically and institutionally required to work through local politicians. While many politicians may work faithfully to serve their constituents, in some cases aid providers find themselves choosing between supporting political pathologies they find unappealing and trying to help victims.</p>
http://www.cato.org/publications/commentary/political-dysfunction-philippines-hurting-haiyans-victimsFri, 15 Nov 2013 09:11 ESTLatest Cato Research on Foreign AidJennifer KeisterSolving Egypt's Subsidy Problemhttp://www.cato.org/publications/policy-analysis/solving-egypts-subsidy-problem
Dalibor Rohac
<p>Subsidies to consumer goods, including fuels and food, account for almost one third of Egypt’s public spending, or 13 percent of the country’s gross domestic product (GDP). Not only are subsidies highly ineffective in helping the poor, they are also an increasingly unsustainable drain on the country’s public finances and its foreign reserves. Yet reform remains a thorny issue in Egypt’s unstable political environment—mostly because subsidies are the main instrument of social assistance used by the government.</p>
<p>Subsidies to consumer goods and fuels have existed in the country since the 1920s. Various approaches are available for scaling them down or eliminating them altogether. However, most of the prior attempts to reform the subsidy system in Egypt have failed. Cash transfers targeted at the poor would be a superior policy relative to the status quo.</p>
<p>Eliminating subsidies and replacing them with cash transfers would produce significant savings and would be politically feasible. A successful reform of subsidies will have to be accompanied by a series of complementary reforms, which would reduce food insecurity in the country and improve supply chains in the areas of food and energy by introducing competition. Finally, prudent macro economic policies, including a reduction in inflation rates, will be necessary to contain the potential effects of food and energy price hikes on poorer households.</p>
http://www.cato.org/publications/policy-analysis/solving-egypts-subsidy-problemWed, 06 Nov 2013 (All day)Latest Cato Research on Foreign AidDalibor RohacFor President Obama and Congress to Subsidize Egypt Today Is to Underwrite Murderhttp://www.cato.org/publications/commentary/president-obama-congress-subsidize-egypt-today-underwrite-murder
Doug Bandow
<p>Dead protesters litter the streets of Cairo. So much for Secretary of State John Kerry’s theory that Egypt’s military rulers “were restoring democracy.” Unfortunately, the dead will have trouble voting in the new and improved Egypt.</p>
<p>Instead of acting as the regime’s enabler, the Obama administration should “reset” relations with Cairo. The U.S. should cut off all aid and withdraw America’s ambassador. If Washington has any influence to exercise, it should do so quietly and informally.</p>
<p>U.S. policy toward Egypt has rarely taken the Egyptian people into account. The $75 billion provided in “aid” over the years was mostly a payoff to successive dictators and their military praetorian guards. All that Washington worried about was “stability.”</p>
<p>The armed services became a privileged caste, with sons following fathers into the military. The Supreme Council of the Armed Forces controls as much as 40 percent of the economy, causing the generals to worry more about personal privilege than national security. Observed the <em>Economist</em>: “combat is perhaps [the military’s] least-developed skill.”</p>
<p>However, after the police were unable to quell protests against Hosni Mubarak in 2011, the army abandoned the dictator in an attempt to save the system. SCAF ruled until last year’s presidential election, which came down to a contest between the Muslim Brotherhood and the Ancien Regime. Secular liberals demonstrated little support.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">The U.S. should end all financial and military aid and get out.”</span></p>
</blockquote>
<p>The run-off featured the Brotherhood’s Mohamed Morsi against Mubarak’s last prime minister, Ahmed Shafik. Many Egyptians viewed Morsi as the lesser of two evils and gave him a narrow victory. Reports circulated—well-sourced but impossible to verify—that SCAF had intended to proclaim Shafik the victor, but backed down after the Brotherhood threatened to expose the vote fraud.</p>
<p>The Brotherhood is no friend of liberty but its membership broadened after the movement emerged from underground, when it was persecuted by successive dictators. Morsi had an opportunity to establish his organization’s democratic bona fides. Alas, little good came from his brief term in office. He made few economic reforms, expanded his powers through decree, presided over rising persecution of Coptic Christians, and failed to reach out to disaffected Egyptians who only reluctantly voted for him.</p>
<p>Yet Morsi’s opponents were no better. The International Crisis Group criticized them for “Viewing election results as altogether meaningless, demanding oftentimes disproportionate representation in decision-making bodies; challenging the basic principle of popular will; and yielding to the growing temptation of extra-institutional means, be it street agitation or calls for judicial or military intervention.”</p>
<p>Moreover, the Mubarak state remained largely intact and obstructed Morsi at every turn. The police disappeared from the streets, allowing crime to surge; they even refused to protect the Brotherhood’s headquarters from mob attack. Mubarak-appointed judges tossed out the elected, Islamist-dominated legislature.</p>
<p>Fouad Ajami of the Hoover Institution noted that “The <em>feloul</em>, the remnants of the old regime, still had the commanding heights of the economy.” Anti-Morsi businessmen and officials may have helped manufacture debilitating electricity and gasoline shortages. After pledging loyalty to Morsi, Gen. Abdul-Fattah al-Sisi worked with the Tamarod movement, which organized the massive demonstrations used to justify military rule.</p>
<p>It would have taken extraordinary skill, forbearance, and luck, none of which President Morsi possessed, to have succeeded. Had the opposition simply waited Morsi would have discredited political Islam—democratically. In this way, argued Reuel Marc Gerecht of the Foundation for Defense of Democracies: “The Egyptian military may have snatched defeat from the jaws of victory.”</p>
<p>Instead, Morsi’s disparate opponents backed SCAF in staging the July 3 coup: the president removed, his top aides arrested, his movement’s media shuttered and journalists arrested, the president and others charged with fanciful offenses, and his supporters gunned down in the streets.</p>
<p>Certainly it was an odd way to go about “restoring democracy.” David Kramer, Freedom House’s president, cited a “significant decline in most of the country’s democratic institutions” after Morsi’s ouster.</p>
<p>What the al-Sisi government actually restored was the old Mubarak structure. The military, “long a cancer on Egyptian society,” in Gerecht’s words, regained its preeminent political role. Gen. al-Sisi selected a Mubarak jurist as acting president. The regime appointed 25 provincial governors, of whom 17 were military generals, two were police officials, and two were Mubarak judges.<br />
<br />
The Interior Ministry reestablished its special departments devoted to monitoring political and religious “extremism.” The discredited police, who fought for Mubarak until the end, returned to their posts. Overall, reported the <em>Washington Post</em>: “Egypt’s new power dynamic, following the July 3 coup that ousted Morsi, is eerily familiar. Gone are the Islamist rulers from the once-banned Muslim Brotherhood. Back are the faces of the old guard, many closely linked to Mubarak’s reign or to the all-powerful generals.”</p>
<p>Egypt’s liberals sought to ride to power atop army tanks. The Coptic Christian minority hoped to shelter for protection behind those same tanks. Yet the Mubarak-era institutions and officials jailed and tortured liberals and persecuted and oppressed Copts. The latter groups are likely to find that they are nothing more than helpless adornments for Western view.</p>
<p>Unsurprisingly, the Brotherhood resisted the military’s demand for abject surrender: stop protests against the coup with no guarantee of meaningful political participation in the future, let alone the prospect that a future election victory would be honored. The movement’s only leverage came from being on the street. In fact, the Brotherhood was in a similar position in 1954 when it backed protestors who demanded that the government, recently taken over by Gamel Abdel Nasser, institute democracy and release political prisoners. Nasser promised elections and the demonstrators went home. Nasser then targeted opposition forces, including six Brotherhood leaders who were executed.</p>
<p>The military regime seemed similarly determined to destroy the Brotherhood. Sen. Lindsey Graham (R-SC), sent to Egypt as an envoy, said: “You could tell people were itching for a fight.”</p>
<p>And Gen. al-Sisi and his fellow generals chose violence over conciliation. Reported the <em>Washington Post</em>, “Two weeks before the bloody crackdown in Cairo, the Obama administration, working with European and Persian Gulf allies, believed it was close to a deal to have Islamist supporters of ousted President Mohamed Morsi disband street encampments in return for a pledge of nonviolence from Egypt’s interim authorities. But the military-backed government rejected the deal and ordered its security forces to break up the protests.”</p>
<p>The military government acknowledged over 600 dead, and the toll almost certainly was much higher. There were reports of police dressed as civilians shooting to provide a pretext for security forces. Many of the killings appeared to be deliberate. Abigail Hauslohner and Sharaf al-Hourani reported for the <em>Washington Post</em>: “government forces were unleashing sniper fire that seemed indiscriminate. Along with scores of Morsi supporters, those who were felled included two journalists and the teenage daughter of a prominent Brotherhood leader.” Sheriff Mansour of the Committee to Protect Journalists decried the “systematic” targeting of the press: “We haven’t seen in Egypt’s history this many attacks against journalists.”</p>
<p>The slaughter in Cairo sparked more violence nationwide, including Brotherhood attacks on government buildings and Coptic churches. These actions were horrid and wrong, but not surprising: the authorities were killing civilians and the Copts were backing the authorities. Indeed, Coptic Pope Tawadros II had appeared on the stage with Gen. al-Sisi when the latter announced Morsi’s ouster.</p>
<p>In the near future the army has the advantage. Civilian mobs have joined the police and army against protestors. The Brotherhood’s resistance, demonized by a captive media largely supporting the coup, has won the group few friends.</p>
<p>However, the movement is well-organized nationwide. It survived prior attempts suppression. Pollster Shibley Telhami argued that President Morsi overestimated the Egyptian people’s Islamic identity, but “now, with their violent repression of the Brotherhood, the generals who ousted Morsi risk underestimating it.” After all, the Brotherhood is closer to the average Egyptian than the liberals, secularists, and Christians backing the coup. Argued Gerecht: “the Westernization of the Egyptian poor has been in retreat for more than 40 years.”</p>
<p>By suppressing the Brotherhood, killing demonstrators, and closing political space to Islamists the government is encouraging the rise of a more radical and violent leadership. Angry younger members may now challenge more moderate leaders or join more combative splinter groups. <em>Financial Times</em> columnist David Gardner warned: “Driving the Brotherhood back underground, alongside harder-line Islamist activists still trying to outflank them, is an assured recipe for prolonged bloodshed.” Indeed, the head of al-Qaeda, Ayman al-Zawahiri, was radicalized when as a member of the Brotherhood he was imprisoned and tortured during a prior crackdown.</p>
<p>Continuing civil disorder is almost certain, with violence “likely to become a constant feature of Egyptian life and politics,” warned Eric Trager of the Washington Institute for Near East Policy. Terrorism may follow, targeting government officials and facilities, Coptic churches, and tourist sites. Islamists fought a similar campaign against the Mubarak dictatorship two decades ago. The International Crisis Group pointed to attacks by Islamic radicals (not the Brotherhood) in the Sinai against government security forces as “equally ominous signs of possible deterioration toward low-scale insurgency as disenfranchised citizens lose any remaining trust in the political process.”</p>
<p>Sen. Lindsey Graham (R-SC) worried that Gen al-Sisi was “going to create an insurgency for generations to come.” Iraq offers a frightening, if thankfully less likely, specter for the future. Full-scale civil war in Algeria following the military’s suppression of Islamists on the verge of electoral victory in 1992 also claimed tens of thousands of lives.</p>
<p>In any conflict there will be little room for liberal and democratic values. Nor does Gen. al-Sisi seem to hold these values. He is said to view himself as a “man of destiny” and Sen. Graham found the general “a little bit intoxicated by power.” In 2006 Gen. al-Sisi wrote a paper while studying at the U.S. Army War College which, reported Trager, reflected “Mubarak’s obsession with preventing Western pressure to democratize.”</p>
<p>The Obama administration ignored U.S. law requiring an aid cut-off after a coup because it wanted to preserve its “leverage.” Unfortunately, by refusing to end assistance the administration demonstrated that the Egyptian government can do anything, except, perhaps, attack Israel, and the money will still flow. Which means America has no leverage. Only by ending assistance will Washington regain any leverage—still likely to be minimal, with Persian Gulf states having pledged $12 billion for Cairo.</p>
<p>Despite having provided $75 billion over the years Washington has consistently demonstrated its impotence in Cairo: The administration wanted to preserve the Mubarak dictatorship, urged President Morsi to govern more inclusively, objected to the army coup, urged the military regime to include the Brotherhood in its political roadmap, and opposed the bloody crackdown. Washington has been reduced to begging the military to promote reconciliation and provide a speedy roadmap back to democracy. One unnamed official admitted to the <em>New York Times</em>: “what we say might not be part of their calculus.”</p>
<p>To show its displeasure the administration delayed the delivery of F-16s, which Egypt can live without. The president also announced cancellation of an upcoming joint military exercise, which the Egyptian military might have been too busy to join. Although U.S. officials have placed a hold on some small economic assistance programs, the administration continues to resist ending military aid. “We are continuing to review our posture and our assistance to the Egyptians,” said White House spokesman Brian Roberts. Yet even Max Boot of the Council on Foreign Relations admitted after the crackdown that “it is clear that the U.S. has no leverage at all.”</p>
<p>The strongest argument for continuing assistance is to buy, or at least rent, the services of the Egyptian military: don’t go to war with Israel, fight extremists in the Sinai, and continue to give the U.S. preferential Egyptian overflight and Suez Canal transit rights. However, the generals won’t take on Israel because they would lose, which would wreck the armed services. Israel also could punish Cairo if it failed to control terrorist activity from its own territory.</p>
<p>Cairo has announced that it is “reviewing” its strategic relationship with Western governments, including the U.S. Washington could end up paying a price for doing the right thing, but here it has leverage. The administration could respond to retaliation by ramping up its public condemnation, denying spare parts for existing U.S.-supplied military equipment, blocking loans from the multilateral development banks, hindering Egyptian imports, discouraging tourist travel to Egypt, encouraging allied action against Cairo, and suggesting international criminal charges against Egyptian leaders for their brutal conduct. The generals would quickly find that they also have a stake in the bilateral relationship.</p>
<p>More than Egypt is at stake. James Traub of the Center for International Cooperation noted that “silence has consequences too.” Denying political Islam a place in democratic systems will not eliminate the movement, but instead force it to operate in violent ways. Said Daveed Gartenstein-Ross of the Foundation for Defense of Democracies: “al-Qaeda’s narrative is furthered, as Ayman al-Zawahiri’s dark predictions about Egyptian politics seem to be proven correct.”</p>
<p>The carnage in Cairo mimics that in Beijing’s Tiananmen Square. To subsidize Cairo today is to underwrite murder. Sen. Rand Paul (R-Kent.) asked of his colleagues who voted to continue providing aid: “How does their conscience feel now as they see photographs of tanks rolling over Egyptian civilians?”</p>
<p>President Barack Obama said that the violence “must stop.” But the generals cannot back down since a resurgent Brotherhood could exact revenge. And the Brotherhood cannot yield since the regime seems determined to destroy the organization.</p>
<p>Washington’s best policy is to support neither side. The U.S. should end all financial and military aid and get out. America should leave this tragic conflict to the Egyptian people.</p>
http://www.cato.org/publications/commentary/president-obama-congress-subsidize-egypt-today-underwrite-murderMon, 19 Aug 2013 10:26 EDTLatest Cato Research on Foreign AidDoug BandowObama Administration Should Exit the Bloody Mess in Egypthttp://www.cato.org/publications/commentary/obama-administration-should-exit-bloody-mess-egypt
Doug Bandow
<p>Secretary of State John Kerry originally refused to characterize the coup in Egypt as a coup. Rather, he effectively endorsed the new military regime: “In effect, they were restoring democracy.”</p>
<p>Too bad the hundreds shot dead on Cairo streets won’t be able to vote in the new restored democracy. Washington needs to “reset” relations with Egypt.</p>
<p>As I wrote <a href="http://www.huffingtonpost.com/doug-bandow/kick-egypt-off-the-foreig_b_3694890.html" target="_blank">here</a>, <a href="http://www.forbes.com/sites/dougbandow/2013/07/29/with-its-foreign-policy-the-obama-administration-is-turning-hypocrisy-into-an-art-form/" target="_blank">here</a>, and <a href="http://www.huffingtonpost.com/doug-bandow/violating-the-law-to-subs_b_3745663.html" target="_blank">here</a>, there never was any doubt that the Egyptian military had staged a coup, and that it was essential for Washington to distance itself from the coming disaster. President Mohamed Morsi was no friend of liberty, but the army had no excuse for destroying democracy. Morsi did not control the military, police, or courts: he wasn’t much of a prospective dictator!</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington should say no more and leave Egypt’s tragic future to be decided by the Egyptians.”</span></p>
</blockquote>
<p>The bloody crackdown in Egypt has clarified events. The military staged a coup. The civilian regime created by Gen. Abdul-Fattah al-Sisi was a façade. The secular liberals who hoped to ride into power atop army tanks sold their nation’s future for a mess of pottage. The military’s attempt to destroy the Muslim Brotherhood guarantees a violent future, likely including terrorism and perhaps ending in civil war. Despite having dumped $75 billion worth of “aid” into Cairo’s coffers over the years, Washington has no “leverage.”</p>
<p>Yet the Obama administration continues to mouth meaningless platitudes. President Barack Obama said that the violence “must stop.” To make that happen he said the U.S. was pulling out of planned joint military maneuvers with Egypt. No doubt, Gen. al-Sisi will be devastated not to be able to enjoy tea with Defense Secretary Chuck Hagel while watching Egyptian soldiers shooting U.S.-made weapons purchased with U.S.-provided dollars.</p>
<p>Secretary John Kerry was more prolix, with these gems: “The promise of the 2011 revolution has simply never been fully realized.” The outcome “will be shaped in the hours ahead, in the days ahead.” The Egyptian government should “respect basic human rights including freedom of peaceful assembly and due process under the law.” The state of emergency “should end as soon as possible.” “The only sustainable path for either side is one toward a political solution.” And my personal favorite: despite the bloodshed, “I am convinced that that path is in fact still open.”</p>
<p>To limit future blow back after having blessed the coup and resulting military government, the administration must comply with U.S. law, which requires ending aid to any nation after military ouster of a democratically-elected government. Despite Barack Obama morphing into Bill Clinton by quibbling over the definition of “is,” even administration lawyers reportedly concluded that the statute applied to Egypt. Now the administration will look like an apologist for murder if it fails to act.</p>
<p>If the administration fails to follow the law and good sense, then Congress should step in. Although the Senate rejected a recent proposal by Sen. Rand Paul (R-Kent.) to end aid to Egypt, events have proved him right. Both chambers should vote to end money for a military regime which appears determined to wreck a nation. The president might veto an aid cut-off, but Congress could vote to override.</p>
<p>Foreign aid does not promote economic development. Nor does it buy political leverage. In Egypt all decades of “foreign assistance” have achieved is to successively identify the U.S. with two army-backed dictators, an unpopular Islamist president, and a brutal military regime. Washington should say no more and leave Egypt’s tragic future to be decided by the Egyptians.</p>
http://www.cato.org/publications/commentary/obama-administration-should-exit-bloody-mess-egyptThu, 15 Aug 2013 13:43 EDTLatest Cato Research on Foreign AidDoug BandowViolating the Law to Subsidize Egypt's Coup: Bipartisan Foolishness in Washingtonhttp://www.cato.org/publications/commentary/violating-law-subsidize-egypts-coup-bipartisan-foolishness-washington
Doug Bandow
<p>U.S. policy in Egypt has been a disaster. For decades Washington backed rule by an authoritarian dictatorship that persecuted religious minorities and socialized the economy. Now the short-lived democratic revolution has been replaced by military rule with a meaningless civilian veneer. Washington should cut off foreign aid and disengage.</p>
<p>Instead, the Obama administration has embraced putative dictatorship, refusing to characterize the ouster of President Mohamed Morsi as a coup. If only George Orwell was alive today.</p>
<p>The military worked with the opposition to encourage demonstrations threatening public chaos. The military arrested the president, top officials, and high-level members of his party and movement. The military leveled fantastic criminal charges against the president and his supporters. The military closed down allied television stations and arrested journalists. The military appointed dictatorial retreads as interim president and other high officials.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington should cut off foreign aid and disengage.”</span></p>
</blockquote>
<p>The military treated all opponents as “terrorists.” The military recreated the de facto secret police, the Interior Ministry departments which investigate political and religious activities. The military shot and killed protestors. But the administration says there was no coup. According to Secretary of State John Kerry, “the military did not take over to the best of our judgment so far.” Rather, “there’s a civilian government,” he claimed. “In effect, they were restoring democracy.”</p>
<p>The administration could have acknowledged that Gen. Abdul-Fattah al-Sisi ruled by force but then argued that the coup was justified. However, that would have been a difficult case to make.</p>
<p>There is obvious reason to suspect the Muslim Brotherhood and President Mohamed Morsi committed more than his share of mistakes. But the first elected leader in Egypt’s 5000-year history was discrediting himself. Left alone he would have ruined the electoral appeal of political Islam without a shot being fired. Moreover, he had taken no irrevocable authoritarian steps. It would have been impossible for Morsi to become a dictator without the military behind him — which explains why real dictators Gamal Abdel al-Nasser, Anwar al-Sadat, and Hosni al-Mubarak all were military men, like Gen. Sisi.</p>
<p>The administration ignored the obvious to avoid triggering the law which required cutting off aid to “the government of any country whose duly elected head of government is deposed by military coup d’état or decree or … a coup d’état or decree in which the military plays a decisive role.” You don’t need an English Ph.D. to recognize that the restriction applies to Cairo today. Apparently administration lawyers agreed, only to be overruled by top policymakers.</p>
<p>Whether or not Washington was implicated in the coup itself — it appears not — the administration clearly endorsed the result. Yet officials appear surprised that a coup would lead to the killing of demonstrators, persecution of those ousted from power, and strengthening of state authority. Secretary Kerry announced that repression is “absolutely unacceptable. It cannot happen.” Except that it has been going on publicly every day for more than a month.</p>
<p>The Obama administration has made as many mistakes as former president Morsi — and may have claimed even greater power than him. Yet policy towards Egypt stands out as one of President Obama’s greatest failures.</p>
<p>The administration reflexively supported the dictator Mubarak even as Egyptians were rallying against him. Only when his fall was inevitable did Washington acknowledge that he might have to go. The administration then accepted President Morsi’s rise, counseling him, to no avail, to rule in an inclusive and democratic manner.</p>
<p>Administration officials were no more successful in urging the Egyptian military, which has received some $40 billion in aid over the years, not to stage a coup. After effectively endorsing the takeover, the administration begged Gen. Sisi not to target the Muslim Brotherhood, lest doing so drive the organization underground and toward violence and terrorism. He ignored these entreaties as well.</p>
<p>Today virtually every Egyptian blames America. Gen. Sisi and the secular liberals criticize the administration for being pro-Muslim Brotherhood. Despite Washington’s de facto endorsement of his putsch, Gen. Sisi complained: “You turned your back on Egyptians.” The Brotherhood, with far greater cause, complains that Washington green-lighted the coup and supports it now. In Cairo American officials talk but no one listens. Administration fecklessness, hypocrisy, and impotence are on display around the world.</p>
<p>Yet leading Republicans have endorsed the Obama policy. Sen. Rand Paul (R-KY) led a lonely campaign to cut off U.S. aid, $1.55 billion annually. The Senate rejected his proposal by a vote of 86 to 13.</p>
<p>At least few Republicans echoed Secretary Kerry’s ludicrous claim that the military is dedicated to birthing Jeffersonian democracy. The army spent six decades supporting authoritarian rule under a parade of dictators and resisted the revolution.</p>
<p>Moreover, coups rarely promote liberal values. Freedom House’s initial assessment after President Morsi’s ouster found that six of eight democratic parameters had declined and the other two had stalled. David Kramer, Freedom House’s president, noted: “The justification for the coup was that Egypt was suffering a drift towards authoritarianism under Morsi. Our analysis, as reflected in the Egypt Democracy Compass, shows significant decline in most of the country’s democratic institutions.”</p>
<p>The military even is restoring the Mubarak elite to power. The interim president was a Mubarak court appointee. The police, who worked to sabotage the Morsi government, have reappeared in force. Secular politician Ehab Samir said: “You can’t stay at odds with them. Your security is dependent on having a strong police force.”</p>
<p>Moreover, reported the <em>Washington Post</em>: “Egypt’s new power dynamic, following the July 3 coup that ousted Morsi, is eerily familiar. Gone are the Islamist rulers from the once-banned Muslim Brotherhood. Back are the faces of the old guard, many closely linked to Mubarak’s reign or to the all-powerful generals.”</p>
<p>Still, Republicans made their share of ludicrous claims. Tennessee Sen. Bob Corker referred to the U.S. as a “voice of calm.” Perhaps Secretary Kerry was whispering sweet nothings in the ears of generals as they arrested opponents and gunned down protestors — after using U.S. aid to purchase U.S. weapons.</p>
<p>John Bolton made a different argument: “Everyone, whatever their politics, agrees that Egypt’s economy needs massive assistance.” Actually, the Egyptian economy needs reform, not subsidies. In fact, aid should be cut because it has helped wreck the Egyptian economy. Generous American “aid” allowed Sadat and Mubarak, and most recently Morsi, to keep the inefficient, bloated Egyptian state afloat despite its manifold failures.</p>
<p>Florida’s Sen. Marco Rubio echoed the clueless Secretary Kerry, warning that if you cut off aid “you lose leverage.” Oklahoma Sen. Jim Inhofe said he would have agreed with the amendment “before we realized the threats that we have in the Middle East.” Sen. John McCain of Arizona worried that ending aid “would send the wrong message at the wrong time.” Sen. Corker referred to sustaining “the values we extend around the world.”</p>
<p>Where, one wonders, is the evidence of this vaunted leverage — after nearly $75 billion in “assistance” over the years? When Presidents Sadat and Mubarak jailed opponents, persecuted Coptic Christians, enriched supporters, and despoiled the economy? When President Morsi claimed extraordinary power and refused to conciliate his opponents? When Gen. Sisi staged the coup? When the general ignored the administration’s advice to govern in an inclusive fashion? When he embraced the corrupt and authoritarian Mubarak elite? One unnamed official reluctantly admitted to the <em>New York Times</em>: “What we say might not be part of their calculus.”</p>
<p>If the Obama administration is willing to torture language and ignore the law to keep shoveling money into Cairo, it is evident that nothing, except presumably war with Israel, would cause Washington to close the spigot. Since Gen. Sisi and his fellow officers can count on America’s money — as well as a promised $12 billion from Saudi Arabia and other Persian Gulf states — they have no reason to pay the slightest attention to Secretary Kerry.</p>
<p>If there’s no leverage, then how does subsidizing a coup provide a good message, reduce threats, or represent our values? As Robert Kagan of the Brookings Institution noted: “To those who argue that we must continue providing aid in the interest of stability, one has only to point to the past three years: Aid has flowed uninterrupted, and just look at all the stability.”</p>
<p>Sen. Lindsey Graham (R-SC) relied on a letter from the American Israel Public Affairs Committee which opposed cutting aid to Egypt which could “negatively impact our Israeli ally.” (Three weeks ago he and Sen. McCain wrote an article calling for an aid halt: “We may pay a short-term price by standing up for our democratic values, but it is in our long-term national interest to do so.”) Once patriotism, the last resort for the scoundrel in American politics today is to claim that something is necessary for Israel’s security.</p>
<p>Aid is not why Cairo has kept the peace with Israel for 40 years. Syria has been at peace with Israel for the same period of time and Jordan even longer. Amman receives some U.S. cash, though not as much as Egypt. Damascus receives none. Yet the al-Assad regime did not respond even after Israel destroyed a nuclear plant and, more recently, missile shipments from Russia.</p>
<p>The Arab states know they would lose a war with Israel. Conflict would be particularly disastrous for the Egyptian generals, since they would lose their means of control and likely positions as well. The Argentinean generals discovered that starting and losing a war is a quick way to end up out of power and in prison. Washington does not need to pay the Egyptians for peace.</p>
<p>Moreover, the military is the force which most threatens both stability and democracy, pushing Egypt toward civil war. The armed services long have personified corruption in Egypt. Between 15 and 40 percent of the economy is thought to be controlled by the military. Service has become a hereditary caste or quasi-aristocracy with many sons following fathers in profitable service as praetorian guardians of the authoritarian political order. While the military regime called on demonstrators to “give priority to the interest of the homeland, to comply with the public interest,” there is little reason to believe that the generals are acting on that basis.</p>
<p>Sam Tadros of the Hudson Institute was quoted by the <em>Post</em>’s Jennifer Rubin as arguing that “one easy solution is to train the Egyptian military.” But Gen. Sisi was trained by the U.S. Washington has educated soldiers from around the globe who have supported coups or committed atrocities. Train the soldiers “on basic policing,” argued Tadros. The problem in Egypt is not basic policing. The problem is that the military has seized political power.</p>
<p>Gen. Sisi declared that “The army stands neutral before all factions.” Actually, the military stands for the military. Indeed, the general has been described as an ambitious man with a “sense of destiny,” always dangerous for democracy, especially one where liberal civil society has not taken root. Far from remaining in the background, Gen. Sisi has added titles and grabbed the limelight. There is no reason to expect him to surrender it.</p>
<p>Of course, secular liberals with a Napoleonic Complex hope to ride to power along with the celebrated man on horseback. Yet democratic-minded activists already have been disappointed by several of Gen. Sisi’s decisions. More setbacks are likely. If secular liberals protest, they are likely to be branded as terrorists. And if political Islamists eventually rise again, secular liberals will find themselves discredited — and with no one to turn to for support.</p>
<p>Unfortunately, America cannot avoid blow back. The situation will worsen with every new protester who is killed or arrested. Warned Robert Kagan: “Despite our repeated claims of neutrality and our calls for reconciliation, in reality we have taken sides in the burgeoning violent confrontation.” If opponents of the military decide to respond in kind — and up the ante with terrorism — Americans might find themselves on the front lines as well.</p>
<p>Democracy, stability, and security long have seemed to be mutually exclusive in Egypt. No outcome looks good. And the U.S. has little control over the outcome.</p>
<p>However, unnecessarily supporting military rule could generate the same sort of long-term harm as Washington’s support for the 1953 coup against another democratically elected leader, Iranian Prime Minister Mohammad Mossadegh. Americans are still paying for that misguided act.</p>
<p>The best policy would be to disengage. Washington should avoid being tied to any group or faction, whether the Brotherhood or the military. Let Egyptians decide their own future. The outcome still might be ugly. But at least someone else would bear the blame.</p>
http://www.cato.org/publications/commentary/violating-law-subsidize-egypts-coup-bipartisan-foolishness-washingtonMon, 12 Aug 2013 13:07 EDTLatest Cato Research on Foreign AidDoug BandowPharaoh Mindedness in Washingtonhttp://www.cato.org/publications/commentary/pharaoh-mindedness-washington
Doug Bandow
<p>U.S. policy in Egypt has been a disaster. For decades Washington backed rule by an authoritarian dictatorship that persecuted religious minorities and socialized the economy. Now the short-lived democratic revolution has been replaced by military rule with a meaningless civilian veneer. Washington should cut off foreign aid and disengage.</p>
<p>Instead, the Obama administration has embraced putative dictatorship, refusing to characterize the ouster of President Mohamed Morsi as a coup. If only George Orwell was alive today.</p>
<p>The military worked with the opposition to encourage demonstrations threatening public chaos. The military arrested the president, top officials, and high-level members of his party and movement. The military leveled fantastic criminal charges against the president and his supporters. The military closed down allied television stations and arrested journalists. The military appointed dictatorial retreads as interim president and other high officials.</p>
<p>The military treated all opponents as “terrorists.” The military recreated the de facto secret police, the Interior Ministry departments which investigate political and religious activities. The military shot and killed protesters. But the administration says there was no coup. According to Secretary of State John Kerry, “the military did not take over to the best of our judgment so far.” Rather, “there’s a civilian government,” he claimed. “In effect, they were restoring democracy.”</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington should cut off foreign aid to Egypt and disengage.”</span></p>
</blockquote>
<p>The administration could have acknowledged that Gen. Abdul-Fattah al-Sisi ruled by force but then argued that the coup was justified. However, that would have been a difficult case to make.</p>
<p>There is obvious reason to suspect the Muslim Brotherhood President Mohamed Morsi committed more than their his of mistakes. But the first elected leader in Egypt’s 5,000-year history was discrediting himself. Left alone he would have ruined the electoral appeal of political Islam without a shot being fired. Moreover, he had taken no irrevocable authoritarian steps. It would have been impossible for Morsi to become a dictator without the military behind him — which explains why real dictators Gamal Abdel al-Nasser, Anwar al-Sadat, and Hosni al-Mubarak all were military men, like Gen. Sisi.</p>
<p>The administration has ignored the obvious to avoid triggering the law that requires cutting off aid to “the government of any country whose duly elected head of government is deposed by military coup d’état or decree or … a coup d’état or decree in which the military plays a decisive role.” You don’t need an English PhD to recognize that the restriction applies to Cairo today. Apparently administration lawyers agreed, only to be overruled by top policymakers.</p>
<p>Whether or not Washington was implicated in the coup itself — it appears not — the administration clearly endorsed the result. Yet officials appear surprised that a coup would lead to the killing of demonstrators, persecution of those ousted from power, and strengthening of state authority. Secretary Kerry announced that repression is “absolutely unacceptable. It cannot happen.” Except that it has been going on publicly every day for more than a month.</p>
<p>The Obama administration has made as many mistakes as former president Morsi — and may have claimed even greater power than him. Yet policy towards Egypt stands out as one of President Obama’s greatest failures.</p>
<p>The administration reflexively supported the dictator Mubarak even as Egyptians were rallying against him. Only when his fall was inevitable did Washington acknowledge that he might have to go. The administration then accepted President Morsi’s rise, counseling him, to no avail, to rule in an inclusive and democratic manner.</p>
<p>Administration officials were no more successful in urging the Egyptian military, which has received some $40 billion in aid over the years, not to stage a coup. After effectively endorsing the takeover the administration begged Gen. Sisi not to target the Muslim Brotherhood, lest doing so drive the organization underground and toward violence and terrorism. He ignored these entreaties as well.</p>
<p>Today virtually every Egyptian blames America. Gen. Sisi and the secular liberals criticize the administration for being pro-Muslim Brotherhood. Despite Washington’s de facto endorsement of his putsch, Gen. Sisi complained: “You turned your back on Egyptians.” The Brotherhood, with far greater cause, complains that Washington green-lighted the coup and supports it now. In Cairo American officials talk but no one listens. Administration fecklessness, hypocrisy, and impotence are on display around the world.</p>
<p>Yet leading Republicans have endorsed the Obama policy. Sen. Rand Paul (R-KY) led a lonely campaign to cut off U.S. aid, $1.55 billion annually. The Senate rejected his proposal by a vote of 86 to 13.</p>
<p>At least few Republicans echoed Secretary Kerry’s ludicrous claim that the military is dedicated to birthing Jeffersonian democracy. The army spent six decades supporting authoritarian rule under a parade of dictators and resisted the revolution.</p>
<p>Moreover, coups rarely promote liberal values. Freedom House’s initial assessment after President Morsi’s ouster found that six of eight democratic parameters had declined and the other two had stalled. David Kramer, Freedom House’s president, noted: “the justification for the coup was that Egypt was suffering a drift towards authoritarianism under Morsi. Our analysis, as reflected in the Egypt Democracy Compass, shows significant decline in most of the country’s democratic institutions.”</p>
<p>The military even is restoring the Mubarak elite to power. The interim president was a Mubarak court appointee. The police, who worked to sabotage the Morsi government, have reappeared in force. Secular politician Ehab Samir said: “You can’t stay at odds with them. Your security is dependent on having a strong police force.”</p>
<p>Moreover, reported the <em>Washington Post</em>: “Egypt’s new power dynamic, following the July 3 coup that ousted Morsi, is eerily familiar. Gone are the Islamist rulers from the once-banned Muslim Brotherhood. Back are the faces of the old guard, many closely linked to Mubarak’s reign or to the all-powerful generals.”</p>
<p>Still, Republicans made their share of ludicrous claims. Tennessee Sen. Bob Corker referred to the U.S. as a “voice of calm.” Perhaps Secretary Kerry was whispering sweet nothings in the ears of generals as they arrested opponents and gunned down protestors — after using U.S. aid to purchase U.S. weapons.</p>
<p>John Bolton made a different argument: “Everyone, whatever their politics, agrees that Egypt’s economy needs massive assistance.” Actually, the Egyptian economy needs reform, not subsidies. In fact, aid should be cut because it has helped wreck the Egyptian economy. Generous American “aid” allowed Sadat and Mubarak, and most recently Morsi, to keep the inefficient, bloated Egyptian state afloat despite its manifold failures.</p>
<p>Florida’s Sen. Marco Rubio echoed the clueless Secretary Kerry, warning that if you cut off aid “you lose leverage.” Oklahoma Sen. Jim Inhofe said he would have agreed with the amendment “before we realized the threats that we have in the Middle East.” Sen. John McCain of Arizona worried that ending aid “would send the wrong message at the wrong time.” Sen. Corker referred to sustaining “the values we extend around the world.”</p>
<p>Where, one wonders, is the evidence of this vaunted leverage — after nearly $75 billion in “assistance” over the years? When Presidents Sadat and Mubarak jailed opponents, persecuted Coptic Christians, enriched supporters, and despoiled the economy? When President Morsi claimed extraordinary power and refused to conciliate his opponents? When Gen. Sisi staged the coup? When the general ignored the administration’s advice to govern in an inclusive fashion? When he embraced the corrupt and authoritarian Mubarak elite? One unnamed official reluctantly admitted to the <em>New York Times</em>: “what we say might not be part of their calculus.”</p>
<p>If the Obama administration is willing to torture language and ignore the law to keep shoveling money into Cairo, it is evident that nothing, except presumably war with Israel, would cause Washington to close the spigot. Since Gen. Sisi and his fellow officers can count on America’s money — as well as a promised $12 billion from Saudi Arabia and other Persian Gulf states — they have no reason to pay the slightest attention to Secretary Kerry.</p>
<p>If there’s no leverage, then how does subsidizing a coup provide a good message, reduce threats, or represent our values? As Robert Kagan of the Brookings Institution noted: “To those who argue that we must continue providing aid in the interest of stability, one has only to point to the past three years: Aid has flowed uninterrupted, and just look at all the stability.”</p>
<p>Sen. Lindsey Graham (R-SC) relied on a letter from the American Israel Public Affairs Committee which opposed cutting aid <em>to Egypt</em> that could “negatively impact our Israeli ally.” (Three weeks ago he and Sen. McCain wrote an article calling for an aid halt: “we may pay a short-term price by standing up for our democratic values, but it is in our long-term national interest to do so.”) Once patriotism, the last resort for the scoundrel in American politics today is to claim that something is necessary for Israel’s security.</p>
<p>Aid is not why Cairo has kept the peace with Israel for 40 years. Syria has been at peace with Israel for the same period of time and Jordan even longer. Amman receives some U.S. cash, though not as much as Egypt. Damascus receives none. Yet the al-Assad regime did not respond even after Israel destroyed a nuclear plant and, more recently, missile shipments from Russia.</p>
<p>The Arab states know they would lose a war with Israel. Conflict would be particularly disastrous for the Egyptian generals, since they would lose their means of control and likely positions as well. The Argentinean generals discovered that starting and losing a war is a quick way to end up out of power and in prison. Washington does not need to pay the Egyptians for peace.</p>
<p>Moreover, the military is the force that most threatens both stability and democracy, pushing Egypt toward civil war. The armed services long have personified corruption in Egypt. Between 15 and 40 percent of the economy is thought to be controlled by the military. Service has become a hereditary caste or quasi-aristocracy with many sons following fathers in profitable service as praetorian guardians of the authoritarian political order. While the military regime called on demonstrators to “give priority to the interest of the homeland, to comply with the public interest,” there is little reason to believe that the generals are acting on that basis.</p>
<p>Sam Tadros of the Hudson Institute was quoted by the <em>Post’s</em> Jennifer Rubin as arguing that “one easy solution is to train the Egyptian military.” But Gen. Sisi was trained by the U.S. Washington has educated soldiers from around the globe who have supported coups or committed atrocities. Train the soldiers “on basic policing,” argued Tadros. The problem in Egypt is not basic policing. The problem is that the military has seized political power.</p>
<p>Gen. Sisi declared that “The army stands neutral before all factions.” Actually, the military stands for the military. Indeed, the general has been described as an ambitious man with a “sense of destiny,” always dangerous for democracy, especially one where liberal civil society has not taken root. Far from remaining in the background, Gen. Sisi has added titles and grabbed the limelight. There is no reason to expect him to surrender it.</p>
<p>Of course, secular liberals with a Napoleonic Complex hope to ride to power along with the celebrated man on horseback. Yet democratic-minded activists already have been disappointed by several of Gen. Sisi’s decisions. More setbacks are likely. If secular liberals protest, they are likely to be branded as terrorists. And if political Islamists eventually rise again, secular liberals will find themselves discredited — and with no one to turn to for support.</p>
<p>Unfortunately, America cannot avoid blow back. The situation will worsen with every new protester who is killed or arrested. Warned Robert Kagan: “Despite our repeated claims of neutrality and our calls for reconciliation, in reality we have taken sides in the burgeoning violent confrontation.” If opponents of the military decide to respond in kind — and up the ante with terrorism — Americans might find themselves on the front lines as well.</p>
<p>Democracy, stability, and security long have seemed to be mutually exclusive in Egypt. No outcome looks good. And the U.S. has little control over the outcome.</p>
<p>The best policy would be to disengage. Washington should avoid being tied to any group or faction, whether the Brotherhood or the military. Let Egyptians decide their own future. The outcome still might be ugly. But at least someone else would bear the blame.</p>
http://www.cato.org/publications/commentary/pharaoh-mindedness-washingtonMon, 05 Aug 2013 09:40 EDTLatest Cato Research on Foreign AidDoug BandowIt's Time for the United States to Cease Financial Aid to Egypthttp://www.cato.org/publications/commentary/its-time-united-states-cease-financial-aid-egypt
Doug Bandow
<p>Egypt is a disaster veering toward catastrophe. President Barack Obama’s decision to ignore U.S. law by continuing financial aid will only exacerbate the situation. The administration’s signal achievement is that almost everyone in Egypt now blames America, which has provided almost <em>$75 billion in financial assistance</em> to Cairo over the years.</p>
<p>Egypt became a top aid recipient after Anwar Sadat switched sides during the Cold War. His government was paid even more for making peace with Israel. Washington argued that the stability seemingly purchased was a good deal. No longer, however.</p>
<p>First, the law requires halting assistance. If the administration doesn’t want to obey, it should urge Congress to amend the law. Only by applying a Clintonesque twist can what happened in Cairo—the army arresting the president and top aides, prosecuting opponents, shutting television stations, detaining journalists, freezing assets, and shooting demonstrators—be called something other than a coup. In fact, the Associated Press detailed how the military planned its takeover for months and aided the group Tamarrod in building opposition to former president Mohamed Morsi.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington’s best hope is to disengage, leaving Egyptians to decide their own future.”</span></p>
</blockquote>
<p>The Heritage Foundation’s James Phillips acknowledged that “the letter of the law does require a cutoff of U.S. aid,” but contended that “the spirit of the law, which was passed to help protect democracy, would support continuing aid because the coup was launched against a leader who was ignoring the will of the people in order to impose his anti-democratic Islamist agenda.”</p>
<p>Traditionally conservatives do not favor legal feelings over enactments. More important, Morsi was not alone in his authoritarian tendencies. Mubarak-era military, judicial, and bureaucratic leaders worked to block democratic rule at every turn. Nor was Morsi the first elected leader to inflate his own powers: George W. Bush and Barack Obama come to mind.</p>
<p>Moreover, it is sheer fantasy to impute democratic yearnings to the Egyptian military, a praetorian institution which served as <em>the guardian of dictatorship</em> since the 1952 coup against King Farouk I. Egyptian military officers are a caste apart, pampered apparatchiks who control as much as 40 percent of the economy. They always have been far more interested in power and privilege than democracy and liberty. Noted Michael Rubin of the American Enterprise Institute: “the military traditionally represents the older elite as well in Egyptian society, which feels that it’s their God-given right to do this sort of thing.” For the generals, Morsi’s authoritarianism simply became a pretext for their authoritarianism.</p>
<p>Second, abundant foreign “aid” has contributed to Egypt’s catastrophic economic failure. Government-to-government assistance has consistently hindered rather than advanced economic progress in developing states. John Bolton recently argued: “Everyone, whatever their politics, agrees that Egypt’s economy needs massive assistance.” Actually, no. What that economy needs is massive <em>reform</em>. Unfortunately, American subsidies discourage reform by underwriting Egypt’s inefficient and counterproductive economic policies.</p>
<p>Third, whatever political influence the U.S. may have gained from foreign aid was dissipated when Cairo realized that it could count on receiving the money irrespective of its behavior. The <em>Washington Post’s</em> David Ignatius contended: “Better to continue aid, and insist that it be conditioned on the military scheduling early elections.” However, that requires the willingness to stop writing checks, which <em>Washington has never done</em> and obviously will never do.</p>
<p>Where is the evidence of American leverage? The Mubarak regime rejected both economic and political reform, creating the corrupt, inefficient state which fails the Egyptian people today. As the revolution unfolded the administration successively declared itself for Hosni Mubarak, his negotiated exit, and his speedy exit, without Egyptians paying the slightest attention. Although the administration attempted to mobilize its network of U.S. trained Egyptian officers, Adm. Mike Mullen, then-chairman of the Joint Chiefs of Staff, admitted that money “couldn’t buy the U.S. the connections it needed in a time like this.”</p>
<p>The decision to continue aid under President Morsi had no positive effect. He pursued exclusionary political and incompetent economic policies, apparently against Washington’s advice. The security services worked to undermine his government, also presumably against the administration’s wishes.</p>
<p>The coup even more dramatically demonstrated U.S. impotence. Observed the Hoover Institution’s Kori Schake: “Reports that the national security advisor, secretary of state, secretary of defense, and chairman of the Joint Chiefs of Staff had tried unsuccessfully to restrain Egypt’s military led to the [conclusion] that the United states has very little influence over a military determined to once again entrench itself above elected civilians.”</p>
<p>No one in Cairo is listening to Washington now. The military is adopting the Egyptian equivalent of North Korea’s “military first” policy, shooting demonstrators, making political decisions, and appointing civilians friendly to the military. Even the coup-friendly <em>Wall Street Journal</em> admitted: “the military drew up the new constitutional ‘road map’ in secret without consultation with the anti-Morsi opposition. The interim president will rule by decree. The constitution, which an authoritarian Mr. Morsi rammed through late last year, will be redrafted by unelected officials,” mostly Mubarak retreads.</p>
<p>Worse, contra Washington’s plaintive pleas, the military has reverted to the Nasser-Sadat-Mubarak policy of suppressing the Muslim Brotherhood. If the movement goes into violent resistance there will be neither stability nor democracy in Egypt.</p>
<p>Deputy Secretary of State William Burns visited Cairo two weeks after the coup. Brotherhood leaders refused to see him. Morsi’s opponents, the fundamentalist al-Nour Party and liberal Tamarrod movement, also rebuffed the U.S. envoy. At least Gen. Abdel Fatah al-Sissi—who simultaneously serves as head of the Supreme Council of the Armed Forces, defense minister, and deputy prime minister—gave Burns an audience. However, the regime continued to target Brotherhood officials even as Burns called for “the military to avoid any politically motivated arrests.”</p>
<p>Nor is anything likely to change. Brent Scowcroft and Eric D.K. Melby argued that “By being smarter with its aid, Washington can promote transparency, rule of law, respect for individual rights (including, importantly, those of women) and the encouragement of a competitive political structure.” Isn’t that what the U.S. was supposed to be doing with its money <em>for decades</em>? Why will the generals listen now when they have additional evidence that the U.S. will <em>never</em> turn off the tap?</p>
<p>America’s “investment” of more than $40 billion in the Egyptian military going back to 1948 isn’t generating much of a return today. Pouring more good money after bad only will guarantee more of the same. Warned the <em>Washington Post</em>: “By refusing to follow the law even after the military’s brutal and autocratic actions, the administration is sending the mess that nothing—short of war with Israel—will lead to a rupture with the Egyptian armed forces. That will merely encourage the generals to continue their reckless and counterproductive behavior.”</p>
<p>Fourth, Americans’ money—about $1.55 billion this year, of which $1.3 billion is for the military—is small change compared to the cash promised by Saudi Arabia and other Gulf States, at least <em>$12 billion</em> at last count. (Similarly, the Morsi government received around $10 billion from Qatar and Turkey.) There’s no need for the Egyptian authorities to listen to the administration if they have other sources of funds.</p>
<p>Fifth, more cash for the military would be counterproductive. The military already is well-funded domestically, with its many economic interests. (A cynic might suggest that the generals are more interested in preserving their position than in promoting democracy.)</p>
<p>More aid would further bloat an already over-sized and over-armed institution. Indeed, much of the money currently is slated for advanced U.S. weaponry, such as F-16s, which provides nothing other than prestige—and profit for U.S. arms makers.</p>
<p>Washington doesn’t need to pay SCAF leaders not to break the peace with Israel. More than anyone else, the generals know that conflict with Israel would be suicidal. Their country is broke, their people are impoverished, and their troops will be very busy if there is a violent showdown with the Brotherhood. Trying to use antagonism toward Israel to unite the nation likely would end up wrecking the institution.</p>
<p>The generals could retaliate against the U.S. by, for instance, cutting off intelligence cooperation. That would highlight how little America has gotten from decades of lavish support and prove that the Egyptian military cannot be trusted. Anyway, the benefits Washington currently is receiving are no bargain, especially given the moral cost of backing continued dictatorship.</p>
<p>Georgetown University students Gabriel Scheinmann and Raphael Cohen complained that “A knee-jerk cutoff of aid would seriously impair the cohesiveness and primacy of the Egyptian military.” That is doubtful given the institution’s other source of funds, but would be good it true. Today the military is the biggest obstacle to Egyptians achieving a freer society.</p>
<p>Sixth, the liberal opposition and private media are living an illusion in their apparent belief that security forces which backed dictatorship for six decades, and ruled no less repressively for months after the 2011 revolution, are now dedicated to freedom. “The liberals and revolutionaries are too quick to hop into bed with the military—it is not their friend,” warned Steven A. Cook of the Council on Foreign Relations.</p>
<p>To the contrary, the Mubarak-era elites which control the military, police, judiciary, and bureaucracy prefer authoritarianism, as long as they are the ones in charge. They are not likely to voluntarily yield ultimate power. Indeed, while Secretary of State John Kerry suggested that the coup might have been necessary to prevent civil war, it was the coup plotters <em>who fomented the threat of civil war to justify the coup</em>.</p>
<p>Moreover, the same tactics used by yesterday’s opposition to unseat Morsi can, and likely will, be used by tomorrow’s opposition to unseat a future, and perhaps liberal, president. Said one Brotherhood supporter: “If [Morsi] goes down, we’ll bring down the president they elect.” The military obviously would be only too happy to remain in charge.</p>
<p>Indeed, it will not be long before those who advocate democracy and liberty find themselves in the army’s cross-hairs. <em>Literally</em>, given the military’s penchant for using live ammunition against protesters. Democracy advocates who subvert democracy should expect nothing less.</p>
<p>In fact, some liberals, who so far have demonstrated no ability to win elections—they performed pitiably in the December 2011 parliamentary vote—are starting to rethink the attempt to grab power atop army tanks. Their own influence is in doubt. The fundamentalist al-Nour party blocked their preferred candidate for prime minister, Mohamed ElBaradei. Then the military failed to consult liberal activists before issuing its political timetable.</p>
<p>Worse, Rahab el-Mahdi at the American University in Cairo warned: “We are moving from the bearded chauvinistic right to the clean-shaven chauvinistic right.” Political scientist Amr Hamzawy called the coup celebrations “fascism under the false pretense of democracy and liberalism.”</p>
<p>Seventh, America’s reputation is on the line internationally. Democracy is necessary, but is not sufficient for development and preservation of a liberal society. However, only the most naïve could believe that the latest coup will yield the latter.</p>
<p>The <em>New York Times’</em> Tom Friedman claimed that “the job of Egypt’s friends now is not to cut off aid and censure, but to help it gradually but steadily find that moderate path.” But giving money to and withholding criticism from coup leaders rewards those who have the least interest in finding a moderate path. Instead, they want to protect the deep military-dominated state that has ruled for years.</p>
<p>The Brotherhood may be no friend of liberty, but political Islamists are far more dangerous if excluded from the political process. The coup naturally feeds the meme that democracy is a fraud. Warned Schake: “Jihad is a likelier result in Egypt than Islamists validating a machination that deprived them of elected office.”</p>
<p>This experience will resonate beyond Egypt. Noted Nader Hashemi of the Center for Middle East Studies: “The lesson that Islamists will learn is that respecting the rules of democracy do not matter, because when they win elections, their opponents do not respect the same rules. It is now likely that a process of radicalization will poison the politics of Egypt and the broader Islamic world for years to come.”</p>
<p>Moreover, for Washington to work so hard to avoid applying the law in order to support a coup which is excluding a large segment of the population—whose candidate won the first free presidential election <em>in Egyptian history</em>—will make a mockery of any future pronouncements about America’s commitment to democracy. U.S. officials never let hypocrisy get in the way of a good speech, but foreign peoples are unlikely to be so forgiving. Schake called it “a Mossedegh moment in American foreign policy,” referring to the Iranian prime minister overthrown at America’s behest in 1953. Senators John McCain and Lindsey Graham argued: “we may pay a short-term price by standing up for our democratic values, but it is in our long-term interest to do so.”</p>
<p>Washington’s best hope is to disengage, leaving Egyptians to decide their own future. The administration should simply point to the law. A coup has occurred and the democratic process has been overthrown by the military, so aid must be halted.</p>
<p>That would respect the rule of law in America. It also would restore a degree of leverage. If the Egypt’s military values Washington’s cash and support, it would act responsibly and quickly create an inclusive political process that restored democracy. Otherwise Cairo faces the prospect of violent instability irrespective of U.S. aid.</p>
<p>If that happens, Washington should not be involved in any capacity. Today “American tax dollars flow no matter which despot rules,” noted Sen. Rand Paul (R-Kent.). It is time to change that policy and halt American assistance to Egypt.</p>
http://www.cato.org/publications/commentary/its-time-united-states-cease-financial-aid-egyptMon, 22 Jul 2013 10:13 EDTLatest Cato Research on Foreign AidDoug BandowEnd Foreign Aid to Egypthttp://www.cato.org/multimedia/daily-podcast/end-foreign-aid-egypt
http://www.cato.org/multimedia/daily-podcast/end-foreign-aid-egyptThu, 11 Jul 2013 12:40 EDTLatest Cato Research on Foreign AidDalibor RohacEgypt's Coup Conundrumhttp://www.cato.org/publications/commentary/egypts-coup-conundrum
Doug Bandow
<p>There are many grand failures of U.S. foreign policy. Egypt has joined the pantheon, with Washington seemingly under attack by every faction in Cairo.</p>
<p>Egypt long has been a national wreck. Its recent history featured rule by an indolent king and a leftish Arab nationalist. A couple of authoritarian generals followed. The economy was ruined by dirigisme economic plans, endless bureaucratic incompetence, and pervasive political corruption.</p>
<p>Washington was only too happy to go along in the name of “stability” since Cairo backed U.S. policy and preserved peace with Israel. This ugly Realpolitik persisted even after the Cold War ended and the Bush administration launched a war to end tyranny and promote democracy.</p>
<p>The people of Egypt finally had enough, forcing the Obama administration’s opinion to shift from “Mubarak is our friend” to “Mubarak should leave in an orderly fashion” to “Mubarak should go—now!” However, the end of autocracy loosed Islamist forces.</p>
<p>This was not what Washington desired, but Egyptians weren’t concerned with what Washington desired. Mubarak’s fall led to the election of the Muslim Brotherhood’s Mohamed Morsi and approval of an Islamist-oriented constitution. Both were flawed, but both were approved democratically. Washington had no choice but to accept Morsi’s rule, after spending decades supporting autocrats who had suppressed the Brotherhood.</p>
<p>Alas, President Morsi failed politically. He failed to accept government limits, especially checks on executive authority. He failed to ensure accountability for government. He failed to accommodate religious minorities and political opponents who feared centralization of power. He failed to reassure those who feared the Brotherhood was determined to Islamicize Egyptian society.</p>
<p>He also failed economically. He failed to open and deregulate the economy. He failed to encourage foreign investors. He failed to offer opportunity to impoverished Egyptians.</p>
<p>After just one year of Morsi’s presidency, millions of Egyptians answered a variant of Ronald Reagan’s famous question: they believed they were worse off than before. They wanted Morsi gone, staging massive demonstrations fortified by appeals for the army to act.</p>
<p>Compromise was possible—bringing opposition figures into government, providing for constitutional reform to check the executive, setting an election date for the lower house of parliament, accelerating elections for the upper house, shortening Morsi’s term. Such a pact would have satisfied no one, but it would have reflected the sort of give-and-take typical in democratic systems.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Can democracy arrive on the back of tanks? Not bloody likely.”</span></p>
</blockquote>
<p>Moderation was in short supply, however, so the generals staged a coup and arrested the president, his top aides, and other Brotherhood leaders. The organization’s headquarters, destroyed by protesters, was sealed, its televisions stations were seized, its businesses investigated, and its journalists were arrested. The military also closed an Al Jazeera station and used state television to limit public dissent.</p>
<p>The military appointed a civilian front man—a Mubarak-era jurist—as president but backed down over the choice of prime minister when secular liberals and conservative Islamists deadlocked. The Salafist Al Nour Party later abandoned the talks, after what it termed the military’s “massacre” of pro-Morsi protesters. A new constitution is to be promulgated, new elections are to be held. The Brotherhood’s future role remains unresolved.</p>
<p>In the middle stands the Obama administration. The Brotherhood argues that the Egyptian military must have had Washington’s okay. Anti-Morsi protesters denounce the U.S. for backing “terrorists,” a.k.a. the Brotherhood. A week after the coup the administration continues to temporize about following the law, which requires a cut-off of foreign aid, now running about $1.55 billion annually, after a military takeover.</p>
<p>Today Cairo suffers from competing demonstrations, bloodshed among antagonistic protesters and army forces, intransigent demands from the Brotherhood, equally unyielding sentiments from coup supporters, and division among military-government forces. It is a disaster, with the potential of becoming a catastrophe.</p>
<p>Although Morsi was responsible for his failures, he was obstructed at many turns. For instance, an unreconstructed judiciary tossed out the elected assembly and blocked plans for a new election. The police, who under Mubarak enthusiastically pummeled demonstrators, refused to defend Brotherhood offices from rampaging mobs.</p>
<p>The opposition, which failed to organize effective political parties and develop political leaders, was little better. The International Crisis Group <a href="http://www.crisisgroup.org/en/publication-type/media-releases/2013/mena/a-difficult-way-forward-in-egypt.aspx" target="_blank">criticized</a> Morsi’s opponents for “viewing election results as altogether meaningless, demanding oftentimes disproportionate representation in decision-making bodies; challenging the basic principle of popular will; and yielding to the growing temptation of extra-institutional means, be it street agitation or calls for judicial or military intervention.”</p>
<p>The military’s coup cannot be disguised as something else. Imagine U.S. army units invading the Oval Office, arresting President Barack Obama and his senior aides, detaining hundreds of top Democratic Party officials, closing down MSNBC and other Democratic-leaning media, appointing Chief Justice John Roberts as caretaker president, and shooting pro-Obama protesters. Americans would call it a coup. <em>Even conservatives</em> would call it a coup.</p>
<p>Unfortunately, coups rarely yield democratic results, especially when staged against freely elected officials. A coup is by definition force and necessarily relies on repression. The result is more often extended dictatorship — Spain 1936, Iran 1953, Chile 1973, and Greece 1967, to name just a few — than renewed democracy. The American Enterprise Institute’s Michael Rubin pointed to the 1960 Turkish coup which, he <a href="http://www.nydailynews.com/opinion/coups-advance-democracy-article-1.1391469" target="_blank">contended</a>, “prevented Turkey’s descent into authoritarianism.” But surely the resulting executions, mass arrests, widespread torture, and large-scale imprisonment also constituted a “descent into authoritarianism.”</p>
<p>Behind the talk of constitutional revision and new elections is an intention to skew future electoral results. The Turkish and Thai militaries used coups to rewrite the political rules to enhance their future influence before returning to democracy. Having removed a Brotherhood member from the presidency, the military is unlikely to allow another one to take office. Indeed, Egypt’s army has no love for democracy, having effectively ruled under Mubarak. The military’s rhetoric after the latest killings was eerily reminiscent of that of the Mubarak regime.</p>
<p>While electoral defeat would have discredited the Brotherhood’s political appeal, military ouster and persecution may encourage its long-term revival. Over time memories of Morsi’s mistakes will fade while his successors exhibit incompetence and malfeasance. The Brotherhood may build on claims of martyrdom to become an attractive alternative to the latest failing and flailing secular alternative.</p>
<p>However, if the Brotherhood does not receive credible assurances that it will be allowed to fairly compete in the future, political Islam in Egypt and elsewhere may turn sharply against democracy. Despite decades of repression in Egypt members of the Brotherhood abandoned neither their theology nor their ideology. Having tried the electoral process and had their victory stolen away, advocates of political Islam may decide that they must rely on other means. <a href="http://www.economist.com/news/briefing/21580533-egyptian-army-widespread-popular-support-has-ended-presidency-muhammad-morsi" target="_blank">Warned</a> the <em>Economist</em> magazine, “Egypt’s Islamists have proven the most dangerous and prone to violence when shut out of the system.”</p>
<p>The Egyptian nightmare is Algeria, where in 1992 Islamists were suppressed after winning first-round parliamentary elections. The Islamic Salvation Front fought back. By the time the conflict ended a decade later tens of thousands had died. If even more modest resistance, peppered by terrorist attacks, reminiscent of Egypt in the 1990s, emerged, the liberties most prized by the young secularists leading the anti-Morsi protests would be the first to be suspended. Warned the International Crisis Group, “it is virtually certain that [the Islamists] remain strong enough to spoil their opponents’ success.”</p>
<p>In any case, secular liberals are fooling themselves if they believe that the military is their friend. Three years ago the Egyptian military was a mainstay of the Mubarak dictatorship. The army famously tried pro-democracy protesters and conducted “virginity tests” on young women.</p>
<p>The military has an incentive to protect its economic as well as political influence. The generals may control up to 40 percent of the economy. Former Pentagon official Jed Babbin <a href="http://spectator.org/archives/2013/07/08/obamas-morsi-mission">wrote in Monday’s <em>TAS</em></a> that the Egyptian military, “much like the mafia, regards Egypt’s economy as its own business.”</p>
<p>Having been invited back into the political process, the military is unlikely to depart voluntarily. Mohamed ElBaradei, former diplomat and leading liberal, supported the coup while promising to resist any retreat from democracy. However, his appointment as prime minister was blocked after objections from anti-Morsi Islamists. He received the vice presidency as a consolation prize. He likely would prove no more effective in protecting democracy.</p>
<p>In fact, Turkey demonstrates that ruthless democratic force ultimately may be necessary to eradicate the military’s special role. Liberals rightly criticize the Erdogan government for its mass prosecutions charging implausible conspiracies against the government. However, such tactics may be the only way to ensure that the troops remain in their barracks in the future.</p>
<p>Moreover, even accepting the Egyptian military’s professions of goodwill, the coup precedent will remain. As Shadi Hamid of Brookings <a href="http://www.theatlantic.com/international/archive/2013/06/is-a-second-revolution-really-what-egypt-needs/277271/" target="_blank">noted</a>, the list of complaints against Morsi from the opposition group Tamarod “consists of problems that will almost certainly plague his successor.” (And afflicted both George W. Bush and Barack Obama!) What happens when the next president expands his powers, fails to fix the economy, and offends well-organized groups? What happens when the police and judiciary obstruct the next president’s administration? What happens when protesters again mass in Tahrir square, demanding the next president’s ouster, by the army, if necessary?</p>
<p>Once coups replace elections, democracy is dead.</p>
<p>After decades of dictatorship, Egyptians understandably are impatient. However, turning to the military to defenestrate political leaders for failing to meet popular expectations risks the country’s future. Elected officials will have an incentive to quickly enhance their power. As the <em>Economist</em> put it, “Crush your opponents could well be their motto.” The opposition will have reason to make the country ungovernable. Government will embody of the worst of the rule of men as opposed to the rule of law.</p>
<p>Even if Egypt avoids more short-term violence, it almost certainly faces long-term instability. There, as elsewhere, the grand hopes of the Arab Spring are withering away. Washington can do little, other than acknowledge its own impotence. The administration should do as the law demands, and suspend U.S. aid. Then, having spent years underwriting autocracy in Egypt — and getting blamed today no matter what it does — the U.S. government should just get out of the way.</p>
http://www.cato.org/publications/commentary/egypts-coup-conundrumThu, 11 Jul 2013 09:06 EDTLatest Cato Research on Foreign AidDoug BandowU.S. Aid Does a Disservice to the Egyptian Peoplehttp://www.cato.org/publications/commentary/us-aid-does-disservice-egyptian-people
Dalibor Rohac
<p>Sen. John McCain, R-Ariz., is entirely justified in <a href="http://www.washingtonpost.com/blogs/post-politics/wp/2013/07/07/mccain-calls-for-suspension-of-aid-to-egypt-other-senators-disagree/" target="_blank">his call for a suspension of military aid to Egypt</a>. The only problem is that the call comes a wee bit late. Since 1948, the aid provided by the United States to Egypt — which was overwhelmingly military in nature — totaled some <a href="http://www.cnbc.com/id/100866294" target="_blank">$70 billion</a>. Only a few weeks prior to the coup, in a remarkable display of lack of prescience, the Obama administration approved $1.3 billion in military aid, waiving the democracy- and human rights-related conditions earlier imposed on the aid package by Congress.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">A continuation of military aid to Egypt is nothing short of foolishness.”</span></p>
</blockquote>
<p>The effects of propping up Egypt’s military are immediately visible. The military is the largest on the African continent and controls a large fraction of the economy, <a href="http://www.timesofisrael.com/egypts-junta-keeps-budget-secret/http:/www.timesofisrael.com/egypts-junta-keeps-budget-secret/" target="_blank">between 15 and 40 percent of GDP</a>, according to some estimates. The military runs hotels and resorts, as well as manufacturing businesses producing anything from kitchen appliances to olive oil and bottled water.</p>
<p>Current events in the country make it very difficult to argue that military aid to Egypt has advanced American interests in any measurable way. If anything, aid has contributed to the creation of a bloated, opaque and extremely powerful organization, which now seems to be the single biggest obstacle in Egypt’s transition to a representative government that could be a reliable partner for the United States.</p>
<p>As the future of Egypt hinges on the wisdom and benevolence of the country’s generals, one needs to stress that U.S. military aid has also done a great disservice to the Egyptian people. Even if one chooses to ignore the excesses of the past week — such as the carnage which occurred on Monday and in which 51 supporters of Muslim Brotherhood died — the coup has set a terrible precedent for the country’s transition, as it suggests that a future elected government might be ultimately accountable to Egyptian generals and not the electorate. While much of the damage that has occurred in the past days is irreparable, it should be exceedingly clear that a continuation of military aid to Egypt is nothing short of foolishness.</p>
http://www.cato.org/publications/commentary/us-aid-does-disservice-egyptian-peopleWed, 10 Jul 2013 08:49 EDTLatest Cato Research on Foreign AidDalibor RohacKilling with Kindness: How Foreign Aid Backfireshttp://www.cato.org/publications/commentary/killing-kindness-how-foreign-aid-backfires
Malou Innocent
<p>Whether Washington calls it capacity building, counter-insurgency, short-term emergency relief or long-term foreign assistance, its multi-decade mission to bring economic development to faraway lands often falls short of achieving its desired outcomes. At the Cato Institute <a href="http://www.cato.org/events/doing-bad-doing-good-why-humanitarian-action-fails">last Wednesday</a>, George Mason University Economics Professor <a href="http://www.ccoyne.com/">Christopher J. Coyne</a> explained why, presenting the <a href="http://www.ccoyne.com/Doing_Bad_by_Doing_Good.pdf" target="_blank">central</a> <a href="http://doingbadbydoinggood.com/book/" target="_blank">arguments</a> of his new book, “<a href="http://doingbadbydoinggood.com/" target="_blank"><em>Doing Bad by Doing Good: Why Humanitarian Action Fails</em></a>.”</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Washington’s multi-decade mission to bring economic development to faraway lands often falls short of achieving its desired outcomes.”</span></p>
</blockquote>
<p>As summarized in <a href="http://www.cato.org/multimedia/daily-podcast/doing-bad-doing-good">this Cato Daily Podcast</a>, Coyne argues that even though coercive and non-coercive forms of state-led humanitarian action can alleviate short-term human suffering, it cannot replicate individual instances of success systematically. Challenging those arguments was Dr. M. Peter McPherson, president of the Association of Public and Land-grant Universities.</p>
<p>Their discussion proved informative, <a href="http://www.cato.org/events/doing-bad-doing-good-why-humanitarian-action-fails">contentious</a> and was overall <a href="http://storify.com/intldogooder/doing-bad-by-doing-good-why-humanitarian-action-fa?utm_campaign=website&utm_source=email&utm_medium=email" target="_blank">well-received</a>, but left under-explored one of the book’s key conclusions, specifically about the allocation of aid — that is, political competition among entrenched bureaucracies typically trumps the selfless moral imperative to help those in need. Humanitarian efforts typically flop because of vested interests, perverse incentives and clashing missions.</p>
<p>Similar problems hamstrung a major food aid initiative in Vietnam, as retired Foreign Service Officer Jaime L. Manzano shared with me and Coyne after the book forum:</p>
<blockquote>
<p>U.S. agricultural surpluses available under PL 480 [the law that created the Office of Food for Peace] can be granted or sold in less developed countries to generate local currencies. These funds are used to cover budgets in recipient countries and meet U.S. agency needs to cover local budgetary expenditures that their operations require.</p>
<p>In the early 60’s, the U.S. Mission in Vietnam requested PL 480 to ship rice to the country. The rice was to be sold in the Saigon market for local currencies and then used to pay for the training and salaries of South Vietnamese soldiers.</p>
<p>Vietnam was a rice exporting country. It had no shortage of the commodity. But the country team argued that the cost of rice was high, and that it needed local currency to pursue the war.</p>
<p>A review of the program showed that local rice was indeed available, and that should PL 480 rice be sent to Saigon, prices would plummet. Rice producers, the small farmers in rural areas where the war was being fought, would become disaffected from the government of Saigon and have reason to ally themselves with the insurgents. The direction of trade would shift toward the Cambodian market, with insurgents functioning as middlemen. Such a change would run counter to the purposes of the U.S. presence in Vietnam.</p>
<p>The PL 480 review team, composed of the AID Vietnam desk officer and the AID Far East program officer, participated in the preparation of a position paper that was vetted through the Department of State, the Pentagon and the Department of Agriculture. State sat on the fence, Pentagon strongly supported the country team and USDA pushed to get rice out of its silos.</p>
<p>The AID PL 480 team continued to point out that the use of rice undermined the reasons for America’s presence in the region. Firstly, it pointed out that if the U.S. continued to bend to the needs of the government of Saigon, the war in Vietnam would become one for which the U.S. would become responsible and not the South Vietnamese government. Secondly, because the rice would alienate the rural constituency in South Vietnam, the U.S. would be losing the hearts and minds of the Vietnamese people who were precisely the ones we wanted to wean away from the insurgents.</p>
<p>The issue went up to the White House. Politics worked its wondrous ways and the rice to Vietnam was approved. Those who argued against the shipments were accused of “disloyalty” to the administration. Within months, those who had the temerity to question the country team were transferred to other posts.</p>
<p>I was one of them.</p>
</blockquote>
<p>That anecdote exemplifies the incentives created by political institutions, regardless of the conflict.In his 2012 book, “<a href="http://www.cato.org/events/war-afghanistan-what-went-wrong">Little America: The War Within the War for Afghanistan</a>,” Washington Post Senior Correspondent Rajiv Chandrasekaran <a href="http://www.washingtonpost.com/world/national-security/little-america-infighting-on-obama-team-squandered-chance-for-peace-in-afghanistan/2012/06/24/gJQAbQMB0V_print.html" target="_blank">uncovered similar inter-agency turf battles</a> that harmed diplomatic efforts to end America’s longest war.</p>
<p>Despite rhetoric about “lessons learned,” development experts and policymakers seemingly fail to fully grasp that political competition is <a href="http://www.jstor.org/stable/725050" target="_blank">immutable to bureaucracies</a>. Coyne explains that agencies and departments, focused on their own discretionary budgets and discrete visions of success, continually jockey to influence policy and advance their narrow self-interest. Citing fellow economists <a href="http://www.law.gmu.edu/faculty/directory/emeritus/tullock_gordon" target="_blank">Gordon Tullock</a>and the <a href="http://www.amazon.com/Bureaucracy-Public-Economics-John-Locke/dp/1858980410" target="_blank">late William A. Niskanen</a>, “Doing Bad by Doing Good”knocks down the popular view that policies always serve a higher benevolent purpose. Among his many conclusions, Coyne argues that competition, much like waste, corruption and other factors that good intentions can never eliminate, “is a logical outcome of the industrial organization of government bureaucracies.”</p>
http://www.cato.org/publications/commentary/killing-kindness-how-foreign-aid-backfiresMon, 10 Jun 2013 09:22 EDTLatest Cato Research on Foreign AidMalou InnocentFixing Egypt's Subsidy Nightmarehttp://www.cato.org/publications/commentary/fixing-egypts-subsidy-nightmare
Dalibor Rohac
<p>With gas at $1.73 a gallon, no wonder Cairo’s traffic is a nightmare. And with bread at less than a cent apiece, it’s no surprise that the city’s sidewalks are lined with discarded pitas. By using subsidies, governments in the Middle East and North Africa ensure that everyone, including the poorest, have access to basic consumer goods at an affordable price. But energy and commodity subsidies are becoming an increasingly heavy drain on public resources, while bringing only very small benefits to those in need.</p>
<p>In Egypt, the middle classes, the well-off and big business are the biggest beneficiaries of the subsidy system. A typical better-off Egyptian receives roughly twice the amount in subsidies as a genuinely poor one. At the same time, subsidies to fuels and food account for almost one-third of the total government budget, or over 10 percent of the country’s GDP. Thus the subsidy issue is the key to solving Egypt’s public-finance problems.</p>
<p>Yet reform is a daunting task. For Egyptians, subsidized commodities are an essential part of the perceived social contract between the citizens and the state. Egyptians have traditionally had little say in public affairs and could never expect much from their government (other than taxes, onerous bureaucracy and a constant hassle). When President Sadat attempted to cut bread subsidies in 1977, violent nationwide riots ensued. The same thing happened thirty years later, following a hike in food prices in 2008.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Making subsidy reforms popular will require compensating the losers—not only the poorest segments of the population.”</span></p>
</blockquote>
<p>So far, attempts to address the subsidy problem have been shambolic. In October 2012, Prime Minister Hisham Kandil announced that the government was planning a gradual reform of energy subsidies. The proposal suggests setting a cap on how much cheap fuel and cooking gas each household can purchase, with each Egyptian household to have access to only two cylinders of fully subsidized butane (used for cooking); further consumption would be subsidized only partially to discourage pervasive leakage to the black market.</p>
<p>The proposed reform helps address one of the problems: subsidized commodities are available to everyone, regardless of their income or wealth. Wealthier Egyptians buy more cooking gas, gasoline or electricity than poorer ones. Thus the bulk of the spending on subsidies ends up benefiting the rich.</p>
<p>At the same time, a cap on purchases won’t solve the deeper problem with subsidies. As anyone who has received an unwanted yet expensive Christmas present from a distant uncle can attest, transfers of commodities are a clumsy way of making people better off. “If only he gave me cash!” tends to be a common reaction, especially when the gift comes without a return receipt.</p>
<p>Similarly, receiving cheap commodities instead of cash, Egyptians often end up with an abundance of goods they either don’t need or don’t value much, resulting in waste and black markets. Imposing a cap or trying to direct the subsidies at poorer families does not change the fact that it is much cheaper to help people by giving them money than by handing out stuff.</p>
<p>Egyptian policymakers need to study other countries that tried to deal with the subsidy problem in the past. In the 1990s, various Arab countries, including Jordan, Yemen, and Tunisia, reformed their food-subsidy programs. Jordan started by first limiting the availability of ration coupons to low-income groups and then by gradually replacing them with cash transfers. By 1999, food subsidies had been replaced by payments from the National Aid Fund.</p>
<p>Policymakers in Yemen followed a similar route and brought down a food-subsidy budget that accounted for 7 percent of GDP in 1996 to zero within three years. However, targeting cash at needy people has proven to be much more difficult than in Jordan, which may explain the return of the subsidy problem in the 2000s.</p>
<p>Finally, Tunisians tried something different. Instead of replacing subsidies with cash transfers, they eliminated subsidies on higher-quality goods that were consumed mostly by the middle classes and the rich, while keeping subsidies on inferior products bought mostly by poor people.</p>
<p>The best option is to simply turn the subsidy system into a temporary stream of unconditional cash transfers to every Egyptian, eliminating the distortions of in-kind redistribution, such as the bloated network of various middlemen, licensed bakers, gas distributors and flour dealers. That has the potential to demonstrate the benefits of cash redistribution and create a wide constituency for future reforms.</p>
<p>Egypt finds itself in a tough place. The military has a firm hold on power. The radical Islamists are challenging the Muslim Brotherhood’s dominance in the political arena. The country is in a state of latent civil unrest. It is no wonder few Egyptian politicians are willing to entertain radical reform. Yet that is exactly what is needed to get the Egyptian economy back on track.</p>
<p>Making subsidy reforms popular will require compensating the losers—not only the poorest segments of the population. After all, the poorest are not necessarily the ones who are most likely to show up in Tahrir Square. While broad compensation would limit immediate fiscal gains from reform, it could be executed rapidly, without first instituting a complex system of means testing.</p>
<p>Very often, economists advising governments recommend carefully timed and gradual reforms, since they create few painful dislocations in the economy. But such an approach ignores the political reality of the country. A plan by Egypt’s government that extends over many years will not be seen as credible if the government has only a tenuous political mandate and faces deep domestic divisions.</p>
<p>This does not mean that the government can’t do anything. By putting in place a reform that is swift and encompassing and makes nearly everyone better off, Egyptian political elites would not only do a service to the Egyptian people—they would also strengthen their own bargaining position in the competition for political power.</p>
http://www.cato.org/publications/commentary/fixing-egypts-subsidy-nightmareFri, 22 Mar 2013 09:25 EDTLatest Cato Research on Foreign AidDalibor RohacThe Case for Ending Aid to Israelhttp://www.cato.org/publications/commentary/case-ending-aid-israel
Doug Bandow
<p>You can’t buy love, it is said, but it isn’t for want of trying by Washington. The United States appears to believe the only way to demonstrate friendship with other governments is to either defend or subsidize them. Unfortunately, the latter strategy rarely works. It’s time for Washington to turn off the aid spigot—especially for wealthier nations like Israel.</p>
<p>Israel does not need foreign aid—it is a wealthy nation with a booming hi-tech sector. Weaknesses elsewhere in the economy are largely self-inflicted through collectivist economic practices. Moreover, Israel is a regional military superpower. If anything, the transfers should run in the other direction. However, the Senate is considering legislation to extend $9 billion in loan guarantees and provide more military support. Rather than reflect warming ties, however, the extra cash indicates an election-year financial raid. Israeli politicians enjoy having more American money to spend while U.S. politicians enjoy spending more American money to win votes.</p>
<p>Yet even some Israelis doubt that American “assistance” is so good for their nation. Last year, Yarden Gazit of the Jerusalem Institute for Market Studies wrote a study that warned “a good many people do not appreciate the real costs of America’s assistance to Israel.” His analysis suggests that true friendship for Israel would be to set it free.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">Instead of continuing to borrow to subsidize other countries, Uncle Sam needs to admit that he’s broke and stop giving away money he doesn’t have.”</span></p>
</blockquote>
<p>Washington has provided more than $110 billion in aid over the years, not counting loan guarantees. Last year, figured Gazit, American support accounted for 1.5 percent of Israel’s GDP, 4 percent of the government’s budget and 24 percent of security outlays. Since 2008, all U.S. aid has been for the military, but money is fungible. Israel receives $3 billion annually, three-quarters of which must be used for the purchase of U.S. weapons. Gazit noted: “While on the face of it, three billion dollars of annual assistance seems fully advantageous, a closer look reveals not a few shortcomings.” Money from America has conditions, most notably the requirement that Israel purchase U.S. weapons, which raises Israeli acquisition costs. Gazit estimated that America’s “gift” may cost around $600 million. That’s a fifth of the nominal “foreign aid.” That money, at least, is primarily a subsidy to U.S. arms makers.</p>
<p>Washington also links aid between Israel and Egypt. The latter typically receives two-thirds of whatever Israel collects. The transformation across the Nile could upend the arrangement, especially if Cairo abandons peace with Israel, but so far the relationship continues.</p>
<p>Jordan, too, receives bountiful American subsidies—about $700 million last year. Although the Egyptian and Jordanian grants are a mix of economic and military support, again, money is fungible. And that means American aid frees up resources for Egyptian and Jordanian military use. While the danger of either country attacking Israel remains small, Gazit pointed out that Israel “must be prepared for any eventuality—even one of very low probability—of a defensive war on either the Egyptian or the Jordanian front.”</p>
<p>Thus, the more money given by America to Egypt and Jordan, the more Israel must spend on its military. Added Gazit: “With Israel’s comparative disadvantage in terms of relative population (over ten Egyptians for every Israeli), maintaining a qualitative advantage in equipment and weaponry is critical.” Gazit cited researcher Erez Raphaeli in asserting that every extra dollar to Egypt requires an Israeli expenditure of $1.30 to $1.40 to maintain the military balance. In this way, complained Gazit, “Not only does American assistance not provide Israel with an economic advantage, it requires Israel to expend additional amounts from its own internal security reserves.”</p>
<p>There’s another problem with U.S. aid. While bilateral defense cooperation has helped boost the Israeli arms industry, the conditions on American aid do the opposite. Since in some cases the Israeli government has to go with U.S. weapons even if the domestic products were better, cheaper or both, efficient Israeli producers lose government contracts and consequent economies of scale. Israeli companies also have to purchase American raw materials, which raise the costs of Israeli weapons in world markets.</p>
<p>Further, notes Gazit: “Due to Israel’s reputation as a military power, any acquisition choice of Israel’s will instantly increase the demand for that product on the international market. When a foreign country contemplates a purchase from an Israeli arms manufacturer, the question of whether Israel’s own army uses that product often plays into the decision.” Thus, if the Israeli government buys American instead, Israeli companies may lose contracts abroad.</p>
<p>Washington even uses its leverage to limit Israeli overseas arms sales. For instance, in 2000 Congress threatened to reduce aid if Israel provided weapons to China. “American assistance places pressure on Israel in this area, with the resulting economic loss,” says Gazit.</p>
<p>Another impact of foreign aid on Israel is the same as elsewhere—a disincentive to be efficient. The guaranteed payment irrespective of Israel’s defense needs “leaves the system with no incentive to become more efficient,” warns Gazit. Former prime minister Ehud Olmert argued that Israel could cut its military outlays with no harm to its security but that American money reduces the pressure to do so.</p>
<p>Perhaps even worse is how U.S. “assistance” further inflates Israel’s already bloated government. Government-to-government “aid” has expanded the overbearing, money-wasting regulatory state around the globe. Israel is no different.</p>
<p>Explains Gazit:</p>
<blockquote>
<p><em>Without this aid, it stands to reason that the government would be forced to reduce the public sector in size, through defense budget cuts, restructuring and increased efficiency in other frameworks. This would direct many more resources toward the private sector, which would be motivated to seek creative and growth-oriented solutions, involving personnel, financing, as well as land and other resources currently held by the government.</em></p>
</blockquote>
<p>Encouraging a larger and less efficient government naturally reduces Israel’s economic strength, which is necessary to maintain an effective defense. More broadly, he argues, “the Government of Israel’s reliance on the American taxpayer sets a negative example which acts to encourage a culture of dependence.”</p>
<p>Gazit worries about the intangible moral damage to Israeli society. He recognizes that budget pressures in America eventually may affect financial aid to Israel. Then unilateral cuts would be seen as weakening the commitment to Israel, yet “if the same move was the outcome of an agreement between the two countries, at Israel’s initiative, Israel’s situation would not be impaired.” Overall, he predicts that “the economic and strategic damage to Israel as an outcome of American aid will only increase.”</p>
<p>The financial trials facing America will worsen in coming years. Instead of continuing to borrow to subsidize other countries, Uncle Sam needs to admit that he’s broke and stop giving away money he doesn’t have. Heavily indebted Spain just announced that it was ending development assistance for Latin America. Washington should do the same, including to Israel. Far from hurting Israel, ending “aid” would be doing America’s ally a favor. Israel is likely to achieve its full potential only after it ends its unnatural dependence on Washington.</p>
http://www.cato.org/publications/commentary/case-ending-aid-israelTue, 05 Jun 2012 (All day)Latest Cato Research on Foreign AidDoug BandowDaniel J. Ikenson discusses sending foreign aid to China on FOX's Special Reporthttp://www.cato.org/multimedia/video-highlights/daniel-j-ikenson-discusses-sending-foreign-aid-china-foxs-special-report
http://www.cato.org/multimedia/video-highlights/daniel-j-ikenson-discusses-sending-foreign-aid-china-foxs-special-reportTue, 25 Oct 2011 14:00 EDTLatest Cato Research on Foreign AidDaniel J. IkensonAmerica's Military Spending Is Foreign Aid — Cut Ithttp://www.cato.org/publications/commentary/americas-military-spending-is-foreign-aid-cut-it
Justin Logan
<p>Watching Washington politicians pretend to fix the fiscal nightmare they created has been a sickening spectacle. The latest stomach turner has been Congress’ targeting “foreign aid” as though that will somehow help make the nation solvent. In fairness to the politicians, their instinct to resort to frivolous cuts is understandable, since the big-ticket items on the national credit card — Medicare, Social Security and defense — are all political minefields. So now Washington is playing on the public’s profound ignorance of how much we spend on foreign aid, pretending that cutting it will make a dent in the deficit.</p>
<p>There are lots of reasons to favor cutting foreign aid, but its impact on the current fiscal shortfall is not one of them. We could zero out foreign assistance tomorrow, and it would not help our predicament one bit.</p>
<p>There’s a different way of looking at the problem that holds more promise, however: Much of America’s military spending constitutes a perverse form of foreign aid. American taxpayers (and their creditors) pay for the defense not just of America, but also dozens of European countries, Japan, South Korea, and a number of other allies and client states. Defense Secretary Leon Panetta, like his predecessor Robert Gates, is currently hectoring our NATO allies to beef up their spending. But they would be stupid to spend their own money when they know we will spend for them. Until we push them off the teat, they will continue suckling.</p>
<p>If we cut off our free-riding (and reckless driving) allies and clients, we could potentially free up some real money: well over a trillion dollars over the next 10 years, and probably a good deal more than that. Even that isn’t enough to solve our fiscal problems, but it’s a start.</p>
http://www.cato.org/publications/commentary/americas-military-spending-is-foreign-aid-cut-itTue, 11 Oct 2011 (All day)Latest Cato Research on Foreign AidJustin LoganIan Vasquez on foreign aid and debt on FOX's Special Reporthttp://www.cato.org/multimedia/video-highlights/ian-vasquez-foreign-aid-debt-foxs-special-report
http://www.cato.org/multimedia/video-highlights/ian-vasquez-foreign-aid-debt-foxs-special-reportFri, 03 Jun 2011 14:00 EDTLatest Cato Research on Foreign AidIan VásquezEnd U.S. Aid to Egypthttp://www.cato.org/publications/commentary/end-us-aid-egypt
Malou Innocent, Abdelilah Bouasria
<div class="subhead"><p><strong>Put America back on the side of democracy</strong></p></div>
<p>A majority of Americans say they favor cutting U.S. foreign aid. So they should, especially for Egypt. The former president, Hosni Mubarak, left behind a political structure molded in his image. In fact, the soft transfer of power from Mr. Mubarak to the armed forces revealed Egypt’s inability to break free from the repressive features of military rule. The result: post-Mubarak Egypt has morphed into a dictatorless tyranny.</p>
<p>Sadly, in Egypt’s case, a freely elected civilian government may prove powerless in the face of the deeply entrenched and well-organized military. Ending America’s ample generosity to Egypt’s military, however, could produce the domestic political shake-up that country desperately needs.</p>
<p>The military continues to exert vast power in post-Mubarak Egypt. In mid-April, a military tribunal sentenced political activist Maikel Nabil to three years in prison for insulting the military. Four days before his arrest, security forces in Cairo fatally shot two protesters and detained dozens more for violating the national curfew and a ban on demonstrations.</p>
<p>This resulting “neo-praetorian” system, as we call it, borrows its name from Rome’s Praetorian Guard, which in ancient times served as an elite imperial unit attached directly to the emperor. Under praetorianism, as the late political scientist Amos Perlmutter explained, a military’s superior organizational capacity replaces that of a dysfunctional civilian leadership. In some cases, like Kemalist Turkey, the army guarded the constitution and eventually handed the leadership of the country to a civilian regime. In Egypt, its army appears reluctant to return to the barracks.</p>
<p>The tragic result of Washington’s lavish material support — about $1.5 billion annually, of which more than half must be spent on American hardware — are glaring. It supports a regime that maintains its authority through the denial of free speech, arbitrary imprisonment, savage repression and routine torture. It diminishes incentives for essential reforms, as members of the military’s senior officer corps assume that American aid is sufficient to perpetuate their grip on power. It also breeds dependency, rampant corruption and decline of the civil state.</p>
<p>Opponents of cutting U.S. aid to Egypt argue that such a move would undermine Egyptian-Israeli peace, U.S. naval access to the Suez Canal, and U.S.-Egypt intelligence cooperation. The reality, however, is both far more complex and far less dire.</p>
<p>Despite all the talk of shared goals, Egyptian-Israeli relations remain problematic. Unsurprisingly, a U.S. diplomatic cable released by WikiLeaks found that the Egyptian military continues to view Israel as an enemy and is seeking military parity with the Jewish state. While many Egyptians may have disagreed with Mr. Mubarak’s strategic partnership with Israel, it would also appear that the Egyptian army has little interest in initiating a war. In addition to economic stagnation and widespread poverty, the country has an ongoing civil war on its western border with Libya; its southern neighbor, Sudan, threatens Nile water security; and the army must now keep the peace domestically by managing the impending political transition. Cairo has many reasons not to embark on a foolish military adventure against Israel; withdrawing America’s military largesse would make that reality even starker.</p>
<p>In addition, ending U.S. aid would not automatically lead to Egypt’s closure of Suez. Given past experience — the 1956 Suez Crisis — Egyptian officials know full well that closing that important strategic and economic waterway is a provocative action. More importantly, they know that the regional and international response would be inevitable, swift and devastating.</p>
<p>The massive public protests that swept Mr. Mubarak from power serve as an inspiration to people the world over. Within the country, Egypt’s powerful military is not — and cannot be — an agent of revolution. Phasing out America’s extensive and highly visible military assistance to Egypt would tear down a key obstacle to indigenous reform. It would also help to enhance America’s credibility as a spokesperson for genuine democracy and economic liberty across the Muslim world.</p>
http://www.cato.org/publications/commentary/end-us-aid-egyptThu, 21 Apr 2011 (All day)Latest Cato Research on Foreign AidMalou Innocent, Abdelilah BouasriaU.S. Foreign Aid Hinders More Than It Helpshttp://www.cato.org/publications/commentary/us-foreign-aid-hinders-more-it-helps
Doug Bandow
<p>The United States will run up a record $1.65 trillion deficit in 2011. Yet Washington keeps subsidizing foreign governments. House Republicans have targeted foreign aid. This year the State Department would lose 16 percent of its budget; humanitarian aid would drop by 41 percent.</p>
<p>Secretary of State Hillary Clinton warns of catastrophe: “Cuts of this magnitude will be devastating to our national security, will render us unable to respond to unanticipated disasters and will damage our leadership around the world.” Moreover, the proposed reductions will be “detrimental to America’s security.”</p>
<p>Even some conservatives stand with Clinton on this issue. For instance, Jennifer Rubin, <em>The Washington Post</em>’s in-house blogger on the right, termed Sen. Rand Paul, a Kentucky Republican, a “neo-isolationist” for proposing to cut what amounts to international welfare.</p>
<blockquote class="pullquote right">
<p class="pq-quote"><span class="open-quote">“</span><span class="pq-body">[T]here is little evidence that foreign assistance advances U.S. interests.”</span></p>
</blockquote>
<p>Despite Clinton’s extravagant claims, there is little evidence that foreign assistance advances U.S. interests. The U.S. provided some $30 billion to Egypt over the last three decades, but the country remains poor and undemocratic. Indeed, aid to the corrupt Mubarak dictatorship helped turn Egypt into popular volcano.</p>
<p>Pakistan has been on the U.S. dole and performing disastrously for decades. The waste, inefficiency and corruption surrounding humanitarian projects in Afghanistan and Iraq are legendary. What of the $27 billion in so-called development assistance requested for next year? These outlays have had no discernible impact on Third World economic growth.</p>
<p>No doubt some projects in some countries have provided some benefits. But there is no correlation between aid and growth. Indeed, generous financial transfers to corrupt dictators often have impeded necessary reforms.</p>
<p>Aid advocates now claim to do better. President George W. Bush created the Millennium Challenge Corporation to reward governments with good policies. Yet, reported the <em>Washington Times</em> last August, the agency “is giving billions of dollars to nations upbraided by the State Department for corruption in government.”</p>
<p>The World Bank also has emphasized better governance. However, reported Tom Porteous, the London director of Human Rights Watch, “multibillion dollar programs funded by the World Bank and others have been politicized and manipulated by the Ethiopian government and are used as a powerful tool of political control and repression.” Aid incentives are all wrong.</p>
<p>The international dole has created long-term dependency and discouraged reform. Even humanitarian aid has a disappointing record. Six months after the earthquake in Haiti, reported the <em>Wall Street Journal</em>, “the process of reconstruction appears to have come to a halt.” U.S. “Food for Peace” shipments, used to dump farmers’ domestic surpluses, are notorious for ruining local farmers and thus undermining local production. This problem continues in Haiti.</p>
<p>On returning from a private aid mission, Don Slesnick, the mayor of Coral Gables, Florida, complained: “We were saddened to see rice bags travel no more than 20 (meters) from the gates of the distribution site before ending up in the back of a pickup truck presumably headed for the black market. To our further dismay, we returned home to read news stories that those very same donations were undercutting Haitian rice farmers who needed income to support their own families.”</p>
<p>Worse is Somalia. Reported the <em>New York Times</em> last year: “As much as half the food aid sent to Somalia is diverted from needy people to a web of corrupt contractors, radical Islamist militants and local United Nations staff members.”</p>
<p>Two decades ago Michael Maren worked with private aid organizations in Somalia and concluded: “Separately we’d arrived at the conclusion that the relief program was probably killing as many people as it was saving, and the net result was that Somali soldiers were supplementing their income by selling food, while the [insurgent force] — often indistinguishable from the army — was using the food as rations to fuel their attacks into Ethiopia.”</p>
<p>Washington and other industrialized nations, like Japan, should reconsider the aid business. Financial transfers rarely are necessary for the West’s defense. The Cold War is over and America’s allies, including regional powers Israel and Turkey, should have graduated from U.S. assistance years ago.</p>
<p>Most Third World nations are tangential at best to American or allied security. While it’s harder to criticize humanitarian aid, private money spent by private organizations is the best way to help those in need around the world.</p>
<p>As for economic development, officials in wealthy industrialized nations should focus on improving their own economic policies and easing access of other nations to the international marketplace.</p>
<p>Despite foreign aid’s abysmal record, the Obama administration continues to back the program. Clinton should listen to her own rhetoric: “It’s time to retire old debates and replace dogmatic attitudes with clear reasoning and common sense.”</p>
<p>One of those dogmas is the assumption that foreign “aid” acts as assistance rather than hindrance. With America drowning in red ink, Washington must cut unnecessary programs. So must its friends and allies. Misnamed foreign aid is a good place to start.</p>
http://www.cato.org/publications/commentary/us-foreign-aid-hinders-more-it-helpsMon, 07 Mar 2011 (All day)Latest Cato Research on Foreign AidDoug Bandow